Investors seeking exposure to the driverless car revolution now have the option of choosing from a variety of self-driving car stocks.
Several companies are racing to get the first fully autonomous vehicle on the streets. Barring special trial programs, we are yet to see the first fully autonomous vehicle on the market, meaning the market is still wide open.
Plus, the novel coronavirus pandemic has led to a substantial boost in interest for the autonomous vehicle space, says Anjana Susarla, an accounting and information systems professor at Michigan State University.
“Part of the resurgence is coming from the fact that the pandemic has made companies realize the importance of investing in contactless technologies and greater automation. In China, for instance, driverless cars were used for disinfecting roads, driverless cleaning and disinfection vehicles for use within hospitals etc. Some airports have likewise installed autonomous disinfecting robotic vehicles. Some other applications are autonomous vehicles for contactless robot delivery systems for food delivery.”
So, whether you feel autonomous driving is benefiting from secular or short-term tailwinds, it’s a great time to invest in self-driving car stocks.
Here are five companies that are big players in the space:
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Ford (NYSE:F)
- General Motors (NYSE:GM)
- Baidu (NASDAQ:BIDU)
- Nvidia (NASDAQ:NVDA)
Self-Driving Car Stocks to Buy: Alphabet (GOOG,GOOGL)
It’s probably not the best time to talk about Google if you are still miffed regarding the outage affecting several Google services, like Gmail, Google Docs, and Google Meet. Work-from-home Mondays are never easy, and when you have to contend with such outages, it’s a real double whammy.
It’s a testament to how strong the brand is, however, that shares of Alphabet did not lose any steam as a result from that recent debacle.
That’s because Google is ubiquitous in our daily lives. It is no longer just a software company. Instead, it’s one of the most diversified multinationals in the world. One of the areas in which it’s sinking its teeth is autonomous vehicle technology. And by every stretch, the company is leading in the field.
It was the first company to roll out a Level 5 fully autonomous vehicle, and its subsidiary Waymo is the leader in autonomous vehicle technology today. At this stage, its premier product Waymo One is still at the test stage. It offers Phoenix residents self-driving ride services, but all rides include a human safety driver behind the wheel. Although the business is still at a nascent stage, it’s valued at $30 billion, a huge figure for a company with no revenues to show at this stage.
Regardless, you can rest easy when you invest in Alphabet stock, considering its profitability profile and diversified business model. With the kind of business it has built, the company can afford to tinker in other areas without compromising its main business lines.
Although Ford is no longer the largest car company by market cap, it’s still the best-selling U.S. car brand. And it’s not like Ford is sitting on its heels. The company is developing its EV solutions, but it is also quite active in developing its self-driving business. It plans to launch its self-driving commercial business in 2022 with vehicles based on the Ford Escape Hybrid crossover.
The cars are the automaker’s fourth-generation self-driving test vehicles in cooperation with Argo AI, an autonomous driving technology start-up headquartered in Pennsylvania. German automaker Volkswagen (OTCMKTS:VWAGY) and Ford have a majority stake in the enterprise, at a valuation of more than $7 billion.
According to John Davis, chief engineer of Ford’s autonomous vehicle subsidiary, these self-driving test vehicles include “launch-intent” technologies that will support commercialization. Heartening, since the major debate is whether the technology is good enough for commercial markets.
From a valuation aspect, F stock is perhaps the pick of the automobile sector. Shares are trading at 0.3 times price-sales, while the S&P 500 trades at 2.7 times, making Ford one of the best self-driving car stocks you can buy.
General Motors (GM)
In January, Cruise, the self-driving car start-up, majority-owned by General Motors, unveiled its first vehicle designed to be driverless. Although the debut was one year late, investors were pleased nevertheless. Cruise Origin is a driverless electric shuttle with no steering wheel, pedals, or other manual controls.
Chief executive Dan Ammann wants drivers to move away from individual ownership and adopt a sharing model: “It is self-driven. It is all-electric. It is shared.”
Time will tell if the concept takes off. Meanwhile, GM has operated a limited autonomous vehicle ride-hailing fleet in Phoenix since 2018. General Motors had aimed to launch a commercial, self-driving vehicle service in San Francisco last year. However, it ran into testing issues when the car had trouble identifying whether objects were in motion.
GM stock is trading at 0.5x P/S and has returned 14.7% year-to-date. Out of the last 12 quarters, the automaker has beat consensus estimates ten times. GM stock trades at 88.8% of its 52-week high.
In 2019, Baidu partnered with Chinese state-owned carmaker, FAW Group, to develop the Hongqi EV AI-powered taxi. It’s the first mass-produced robotaxi in China. It’s still in the testing phase in multiple cities, including Beijing and Guangzhou.
Its fleet of 300 driverless vehicles has logged 1.2 million miles in 13 different cities. At the moment, Baidu’s Apollo Robotaxi fleet has a human driver and is limited to routes within 31 miles. Ultimately, the company hopes to replace truck drivers and taxi drivers, with no human safety drivers behind the wheel.
BIDU stock has returned 50.6% in the year thus far. Of the last 12 quarters, 11 have been positive earnings surprises. Shares are trading at 18.4x forward price-earnings, not bad when you check out Tesla (NASDAQ:TSLA) and NIO’s (NYSE:NIO) valuations.
Nvidia’s business model is highly varied. It designs graphics processing units for the gaming and professional markets, but it’s also active in the mobile computing and automotive market. Date centers and AI services remain the lynchpins of future growth.
Its AI businesses center around semi-autonomous and fully autonomous vehicles that will use AI-enabled products. Its platform, Nvidia Drive AGX, is a full end-to-end solution providing hardware, software, and sample applications.
These platforms also include rich software developer kits (SDKs) to accelerate autonomous vehicle development. Nvidia also plans to enter the market for automated lane-keeping, cruise control, and other driver-assistance features. Its new self-driving technology uses the “Orin” processing chip. Vehicles using the system are expected to start production in early 2023.
NVDA stock has proven to be a multibagger of epic proportions. Shares have shot up 1542% in five years. Sales are expected to grow 20.4% next year, making the P/S of 22.4x look reasonable.
Like others on this list, Nvidia is a diversified conglomerate, so you don’t need to worry since its other business can keep on churning profits. At the same time, the autonomous vehicle segment will continue to make meaningful, significant gains.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.