The $7 billion automobile industry is about to go through its biggest transformation in decades as self-driving cars begin to hit the market.
Most investors will immediately throw their money into the auto manufacturers. They won’t be wrong. Many do stand to benefit. However, I believe the strongest opportunity lies in another area of technology.
The semiconductors. Without these high tech, super fast systems, self-driving cars will not work.
There are three chip companies at the forefront of the race to power the future of transportation. While one currently stands out above the rest, I believe all three will eventually reap the rewards of the transformation of global transportation.
Let me tell you about each of these semiconductor stocks to buy.
Intel (NASDAQ:INTC) may not be the first semiconductor stock that comes to mind when thinking of the self-driving revolution, but its $15.3 billion purchase of Mobileye last year immediately made it a strong contender in the sector.
One of the biggest catalysts here is INTC’s partnership with Volkswagen (OTCMKTS:VLKAF) and Champion Motors. It was recently announced that the companies plan to roll out a fleet of self-driving vehicles — fueled by Mobileye’s software technology — in Israel next year. The service is expected to be fully operational by 2022.
Intel’s size and ability to scale combined with the technology it acquired from Mobileye make it a key player among other semiconductor stocks. I expect its push into autonomous vehicles will generate large revenue in the years ahead and ultimately impact INTC’s bottom line — and share price — substantially.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) isn’t a major player in the self-driving car space just yet, but I suspect it will be soon. Why? Because while the company has historically lagged INTC when it comes to both the innovation of new chips and transitions into new high-growth sectors, it typically follows in INTC’s footsteps.
The shift may have already begun. Rumors that AMD will start providing chips to self-driving auto manufacturers have floated around. Still, the company appears to be watching from afar right now.
There is no urgent reason to jump into AMD today. In fact, I am staying away from it for several reasons. Unless the business model changes soon, it may be too late to the party.
Nvidia (NASDAQ:NVDA) always seems to be in all the right places. It is a leading chip maker for video games and the esports industry. And during the cryptocurrency craze, the demand for NVDA’s high-performance chips was through the roof.
Now, the boom in self-driving vehicles is once again driving demand for the company’s products.
NVDA is the leading chip maker for autonomous vehicle platforms and boasts more than 350 customers in the space, making it one of the most appealing semiconductor stocks to buy. However, there were some negative headlines last month when Tesla (NASDAQ:TSLA) announced it would no longer use NVDA’s chips and instead develop its own.
This should be a one-off event. I do not anticipate the majority of auto manufacturers will begin making their own chips, so NVDA should continue to enjoy strong demand.
And the Winner Is…
I still believe all three of the semiconductor stocks I mentioned stand to make investors a lot of money in the self-driving car boom, but I’d like to see each company make some adjustments first.
In the meantime, NVDA is my clear cut favorite. It has a leg up in the race to autonomous vehicles and I expect it will remain a leader in the years ahead.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of Investment Opportunities and Early Stage Investor. He has dedicated his career to getting investors into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA), +1,044% in Tesla (TSLA), +611% in Liquefied Natural Gas Limited (LNGLY), +324% in Bitcoin Services (BTSC), just to name a few. If you’re interested in making triple-digit gains from the world’s biggest investment trends BEFORE anyone else, click here to learn more about Matt McCall and his investments strategy today.