Top 7 Autonomous Vehicle Stocks to Buy Now
Autonomous vehicle stocks will prosper as the industry evolves.
Up until around 2020, the automobile industry seemed content to continue down its traditional path. Yes, there were potential disruptions on the horizon. However, the vast majority of vehicles remained reliant on internal combustion engines. And self-driving vehicles seemed more science fiction than reality. Over the past two years, however, the panorama has shifted. The legacy automakers have gone all-in on making their fleets electric as quickly as possible. Meanwhile, there are new and upcoming launches of autonomous vehicles all over the industry. To put it simply, the automotive industry faces its biggest structural change in decades as it navigates the twin challenges of electrification and autonomous driving. These seven autonomous vehicle stocks should help investors navigate the transition successfully.
Tesla Inc. (ticker: TSLA)
Tesla has been in the news lately, launching its new full self-driving beta 10.9 software update earlier this month. Critics were quick to go after the firm, suggesting that the software is unsafe and leading to crashes. The California Department of Motor Vehicles is reportedly investigating Tesla's safety record following recent videos of Tesla vehicles using self-driving technology in a dangerous manner. All the controversy could well be good news for Tesla, as it serves as free marketing. From a purely technical standpoint, rivals such as Waymo are arguably further along in developing full autonomous driving capabilities. But Tesla's software generates substantial interest in the brand, and Elon Musk is a master of turning criticism into positive outcomes for Tesla shareholders. Admittedly, Tesla's lofty valuation isn't easy to embrace, but it's hard to discuss self-driving without mentioning Tesla.
Ford Motor Co. (F)
On the other side of the spectrum from Tesla, there's Ford. Cathie Wood of Ark Invest recently generated controversy saying that Ford and General Motors Co. (GM) are the true bubble stocks. Wood says that as electric vehicles take over the market, GM and Ford will see their sales collapse. Ford isn't going to go down without a fight, though. At its 2021 Investor Day, Ford detailed plans to get to a 40% electric fleet by 2030. It will spend $30 billion on electrification over the next five years and develop its IonBoost batteries. As it pertains to autonomous vehicles specifically, Ford is rolling out autonomous vehicles in conjunction with Lyft Inc. (LYFT) and Argo AI. Argo is a joint venture backed by Ford and Volkswagen Group (VWAGY). Argo vehicles are already in tests in Austin, Detroit and Palo Alto, among other cities. As Argo rolls out nationally, it should validate Ford's strategic direction.
General Motors Co. (GM)
General Motors is even further along than Ford in the autonomous driving race. For many years, GM has been investing in its Cruise division. Cruise has obtained a private market valuation of $30 billion and secured funding from the likes of Microsoft Corp. (MSFT), SoftBank Group Co. (SFTBY) and Honda Motor Co. (HMC). Meanwhile, GM's overall market capitalization is just $90 billion now. This means that if Cruise is removed from the equation, the rest of the company is selling for just $60 billion. That's at the same time that GM earned more than $10 billion in net income last year. Thus, GM stock is selling at nine times trailing earnings, or closer to six times earnings if Cruise is viewed as a separate entity. Futurists such as Cathie Wood can claim that legacy automakers are a bad investment, but the numbers make a strong argument that GM in particular remains a bargain.
The recent sell-off in tech is starting to hit even the FAANG stocks. Alphabet shares, for example, have slipped $400 from their recent highs. This could make for a decent entry point on the tech giant. While the search business is still the main driver of financial results for Google, Waymo could be a big piece of its growth plans for the 2020s. Google has developed many moonshot programs internally which have the potential to become massive properties. Waymo is arguably the most interesting moonshot. Google has invested in it for many years. Google has already built thousands of Waymo vehicles which have, collectively, driven more than 20 million miles on public roads. That leads to a treasure trove of real-world data that Google can analyze. It's unclear exactly how Alphabet will monetize Waymo in coming years, but possibilities such as a self-driving taxi service could lead to tremendous earnings growth.
Intel Corp. (INTC)
Intel, like Alphabet, offers investors optionality. Self-driving isn't the main appeal to Intel stock, but it gives its shareholders a sort of cheap call option on future innovation. That's because Intel acquired self-driving technology company Mobileye for $15 billion in 2017. Now, Intel is preparing an initial public offering for Mobileye which could value the firm at an estimated $50 billion. This should represent a windfall for Intel shareholders, giving it capital to buy back stock, increase its dividend, or fund other investments. As things stand now, Intel is selling for just 11 times its estimated full-year 2021 earnings. And shares could heat up in 2022 as investors start to see Mobileye's potential turn into a concrete valuation as the deal advances.
Texas Instruments Inc. (TXN)
Texas Instruments has taken a similar road to Intel. It is a broadly diversified semiconductor company that has put a lot of its energy into the automotive space. Texas Instruments focuses on analog chips. These are semiconductors that sense real world information such as weather conditions and convert it into digital outputs. This sort of data is vital for growing applications such as the "internet of things." All the remote monitoring and security applications will require heaps of analog chips. Perhaps nowhere is this more clear than in the car industry. Self-driving vehicles will need tons of data inputs to safely navigate. The company is also a leader in the chips that go into the entertainment units of automobiles as well. Once full self-driving is achieved, presumably people will want better in-vehicle screens and devices since they won't have to drive during their commute. Texas Instruments will benefit from that trend as well.
ChargePoint Holdings Inc. (CHPT)
Automakers and semiconductor companies aren't the only way to get exposure to autonomous vehicles. Charging equipment will be another key piece of the puzzle. Autonomous vehicles will be great on their own. However, the limitations of current battery technology make it hard to get an extended range into many electric vehicles today. By having seamless charging available everywhere, it will allow autonomous vehicles such as robot taxi fleets to easily get more power on the go instead of having to frequently return to home base. This should boost efficiency and adoption rates for electric autonomous vehicles more broadly. ChargePoint has grown rapidly, and is a top player in the charging space. This is likely to be a market with substantial first-mover advantages, and ChargePoint is positioning itself appropriately.
Top 7 autonomous vehicle stocks to buy now:
-- Tesla Inc. (ticker: TSLA)
-- Ford Motor Co. (F)
-- General Motors Co. (GM)
-- Alphabet Inc. (GOOG, GOOGL)
-- Intel Corp. (INTC)
-- Texas Instruments Inc. (TXN)
-- ChargePoint Holdings Inc. (CHPT)
