Self-driving car companies hit a major pothole earlier this year.
Long a favorite of tech-loving investors, these companies could not keep up with the blows of the novel coronavirus. Funding challenges, testing delays and factory closures made it tricky for even the best-funded businesses to thrive. Now, though, there is reason to take note. After months of heading in reverse, autonomous vehicle stocks are revving up.
What changed? Well, self-driving car companies found their first silver lining in social distancing. Consumers wanted to get essential products like groceries and prescriptions without braving crowded, germ-ridden stores. In turn, autonomous vehicles provided an obvious solution. In the InvestorPlace live blog, we have covered how Nuro, a startup in the space, has formed enviable partnerships with the likes of CVS Health (NYSE:CVS), Kroger (NYSE:KR) and Walmart (NYSE:WMT).
The next big opportunity came from the summer IPO rush. Tech stocks lead an impressive market rally, and investors were desperate for new opportunities. IPO after IPO, red-hot tech companies hit the market. Within the last few weeks, Wall Street welcomed two autonomous vehicle plays. Fresh money and fresh enthusiasm, combined with a recovering industry, is the perfect recipe.
Thanks to pandemic roadblocks, this may not be the year driverless cars go mainstream. But getting into this accelerating industry now is a perfect chance to profit. And before you know it, self-driving car companies will facilitate your grocery runs, your morning commute and maybe even your next road trip.
So, with all of that in mind, position yourself for portfolio success with these seven self-driving car companies:
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
General Motors (NYSE:GM)
Velodyne Lidar (NYSE:GRAF)
Now, let’s dive into each!
Self-Driving Car Companies: Alphabet (GOOG, GOOGL)
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Here is a staggering statistic: In the United States, 1.35 million individuals die each year on roadways.
What if there was a way to eliminate the dangers of driving? To make it safer and easier for all involved? That is exactly what Waymo — which touts itself as a new way forward in mobility — aims to do. The Alphabet subsidiary has the backing of a market leader, and it just so happens to be one of the largest self-driving car companies in the world.
So, how exactly does Waymo make driving safer? Well, the company acknowledges that human error is behind 94% of all car crashes. Thus, by removing humans from the driver seat, it thinks it can revolutionize transportation and let technology do the hard work.
Since emerging just over a decade ago, Waymo has gotten to work solidifying its business model and getting self-driving cars on the road. It currently is focused on Phoenix, Arizona, where it has a fleet of driverless and semi-driverless cars. Because the tech still needs some testing, its driverless fleet often has a real human up front.
Another important thing to note is that for the most part, Waymo is not focused on building its own cars. It outfits vehicles from the likes of Toyota (NYSE:TM) and Fiat Chrysler (NYSE:FCAU), incorporating cameras and LIDAR sensors. Waymo then takes it up a notch, relying on cutting-edge artificial intelligence to make its cars drive smarter — and safer — than humans. This deep learning process takes data from on-road and simulation testing, helping the driverless cars predict and respond.
Overall, it should not be surprising that Alphabet is so innovative — that is what the Google parent does best! That said, investors will also benefit from its self-driving trucks and moves into the luxury market.
General Motors (GM)
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Alphabet and General Motors are neck and neck in a battle between self-driving car companies. Through Waymo and Cruise, a company GM acquired in 2016, the duo are competing for autonomous vehicle dominance.
However, despite their shared goal of developing fully autonomous fleets for ride-hailing services, Waymo and Cruise could not be less alike.
Waymo is all about perfecting the software, relying on existing vehicles to do the driving. General Motors — which benefits from its decades of making cars — wants to cut out all middlemen. GM first purchased Cruise, and then later acquired Strobe, a California-based company specializing in LIDAR sensors. Cruise wants to outfit GM cars with its minimalist sensors, owning all parts of the tech.
General Motors has ramped up self-driving tests in cities including Scottsdale, Arizona, Detroit and San Francisco. One test even allowed employees to hail Chevy Bolt electric vehicles as driverless taxis. Talk about killing two birds with one stone!
Additionally, the innovation keeps coming. In April, Cruise shared that its fleet of all-electric Bolts had made another environmentally friendly adaptation. The self-driving fleet is completely powered by renewable energy.
Investors are likely most interested in its January 2020 announcement of Origin, a futuristic autonomous vehicle from Cruise. Origin is everything enthusiasts want. It is high-tech and disruptive. Some say it is not a car — it rethinks what you actually need for a ride-hailing service. Origin lacks a steering wheel, pedals, gear shift and side-view mirrors. Instead, the Origin has a lot more seating.
It may be a few years before Origin is on the road, but it sure is exciting.
Self-Driving Car Companies: Intel (INTC)
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Intel is best known in the world of semiconductors and chips, but it is also a major player in the world of self-driving car companies. Its $15.3 billion acquisition of Israeli startup Mobileye in 2017 solidified this leadership.
Mobileye started life developing cameras and image-processing software to make driving safer. Running on variations of its EyeQ chip, automakers like Tesla (NASDAQ:TSLA), BMW (OTCMKTS:BMWYY) and General Motors sought to partner with Mobileye.
Now that Intel is in the picture, Mobileye has an even larger reach. Intel sold 17.4 million cameras, chips and software systems in 2019. That alone should be interesting to investors, but there is more to like. The Mobileye division is currently working on two different self-driving systems, giving it an edge on competitors. One solely uses cameras, hearkening back to its early days. The other combines radar, LIDAR and other depth-detection sensors. Like all of its competitors, Mobileye still has a long way to go.
What can you expect in the future? Like GM and Alphabet, Intel is also dabbling in the ride-hailing space. It acquired Moovit, a startup that provides real-time mapping and trip-planning services, in May. Together with Mobileye tech, Intel plans to build this out into a fleet of self-driving taxis. Testing on this fleet is already underway in Tel Aviv, and the company hopes to expand to South Korea and Paris soon.
Importantly, Intel is also moving into the consumer niche. Its Mobileye struck a deal with Chinese electric vehicle maker Nio (NYSE:NIO) in November 2019. Through this partnership, Nio has agreed to a large-scale supply deal. It gives Mobileye vehicles to outfit, and Mobileye supplies the self-driving tech. Together, Intel and Nio will one day supply Chinese consumers with their own autonomous vehicles.
Source: JHVEPhoto / Shutterstock.com
If you want a self-driving car, chances are high you will be relying on LIDAR. The tech — which stands for light detection and ranging — involves using laser light pulses to measure distance and help an autonomous vehicle “see” its surroundings.
Sure, some self-driving car companies are forging ahead using just a series of cameras. But many players in the space, including Luminar, see LIDAR as a requirement.
Orlando-based Luminar has been around since 2012 and it is finally coming public, thanks to a deal with SPAC Gores Metropoulos. Once the reverse merger closes, Luminar will trade on the Nasdaq Exchange under the symbol LAZR. According to early filings, Luminar has an enterprise value of $2.9 billion and an equity value of $3.4 billion.
But what exactly does Luminar do? Not that long ago, LIDAR was prohibitively expensive. Automakers flirted with the idea of incorporating the laser sensors in their vehicles, but could not afford such implementation at scale. The 2018 Audi A8 included the tech, but critics were quick to bash the primitive sensors.
Luminar thinks it can change that, breaking into the consumer auto market with competitively priced sensors. It has already secured 50 commercial partners and plans to sell 100 sensors this year. Importantly, in a market where these sensors once cost $75,000, Luminar thinks it can charge $1,000. Investors will appreciate that it has already signed a supply deal with Volvo (OTCMKTS:VLVLY). Volvo plans to incorporate its LIDAR sensors starting in 2022. If Luminar can nab similar deals, it could quickly become a self-driving winner.
Investors will also appreciate its institutional support. Peter Thiel, Volvo and VectoIQ, the blank-check company behind Nikola (NASDAQ:NKLA), are all early backers.
Self-Driving Car Companies: Baidu (BIDU)
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Baidu is not messing around. The company has the largest platform for autonomous driving in the world. It has 500 self-driving vehicles that have logged 6 million kilometers and transported 100,000 passengers. Importantly, it also operates in China, one of the largest global markets for driverless cars.
American investors often compare Baidu to Alphabet, and the Chinese company takes that seriously. Baidu launched its first autonomous vehicle project in 2013 through its deep learning research lab. Squaring up with Waymo, its first driverless car hit the road in 2015 thanks to a partnership with BMW. Now, its Apollo project is leading the way. Some metrics — although not perfect — have even suggested that Apollo vehicles outperform those of Waymo.
The first Apollo fleet uses vehicles from FAW Group, although Baidu has since signed supply partnerships with Toyota and Geely (OTCMKTS:GELYF). The self-driving cars operate near full autonomy, but like Waymo, Baidu keeps human drivers on board for safety.
Importantly, if you live in China, you can actually hail a robotaxi through Apollo. Baidu has launched this ride-hailing service in Cangzhou and Changsha, and it is also the first company to receive self-driving approval to operate in Beijing. The program in Cangzhou includes 55 drop-off and pick-up areas, focusing on key locations like hotels and train stations. Ideally, it will help consumers get around with greater ease.
There is one more thing for investors to note. The Apollo Computing Unit just launched what it considers the first production-ready computer for self-driving cars in the world. Processing data from cameras and radars, the computer has a lot of potential. It will roll out later in 2020, first focusing on autonomous valet parking. What a perfect solution for this pandemic world.
Velodyne Lidar (GRAF)
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David Hall founded what would become Velodyne Lidar back in 1983. At the time, it was an audio company specializing in subwoofer technology. Now, almost four decades later, Velodyne Lidar is coming public through blank-check company Graf Industrial. When the reverse merger closes, the newly public company will trade on the New York Stock Exchange under symbol VLDR.
As its name implies, Velodyne now specializes in LIDAR sensors. Hall and the team joined a 2005 competition hosted by the Defense Advanced Research Projects Agency (DARPA). There, they realized that early LIDAR systems faced serious limitations. Feeling inspired, Hall came back to the competition, bringing a new system that could analyze 1 million data points per second. Previous versions could analyze just 5,000 points.
From there, Velodyne quickly became a market leader. Its sensors are pricey — selling for as much as $75,000. According to Ars Technica, this business model works because Velodyne courts self-driving startups looking to build prototypes. These startups are only building a few vehicles, are well-funded and want the best sensors available.
While Velodyne maintains a competitive position in this prototype-focused market, it still faces an uphill climb. Chinese rivals are entering the market, and lower-cost products from companies like Luminar are appealing. Recognizing this, Velodyne recently unveiled Velarray, a cheaper product geared toward the automaker market.
Early leadership and backing from Baidu, Ford (NYSE:F) and Nikon (OTCMKTS:NINOY) make it stand out. If you need more convincing, consider this. InvestorPlace analyst Matt McCall wrote recently that Velodyne Lidar was a bet on the future of transporation. He also likes that it offers products such as advanced driver-assistance systems, giving it a diversified business.
Self-Driving Car Companies: Nvidia (NVDA)
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Nvidia, the last of the self-driving car companies on this list, takes a unique approach. Any automaker can buy its graphics processing units and systems on a chip and implement them in their vehicles. In fact, plenty of cars currently on the road include Nvidia products.
The company first announced its autonomous chips just five years ago, when it unveiled its Nvidia Drive computing platform. Since then, these chips have become even more powerful. Nvidia has worked with dozens of companies including Tesla, Toyota and Volvo.
While investors should like its track record, its future looks even brighter.
Nvidia is getting serious about a few things. The first is that the company is rapidly embracing software. It recently joined forces with Mercedes-Benz to build a fleet of autonomous vehicles from the ground up. The vehicles will use supercomputers from Nvidia, but they will also have software-designed architecture. In other words, Nvidia plans to play an active role even after the vehicle launch. Referencing the business models of Apple (NASDAQ:AAPL) and Tesla, the company says it will work with Mercedes-Benz to push software updates out as the tech — and the needs of drivers — evolve.
This Mercedes-Benz partnership is indicative of what else is to come. Nvidia wants to be a part of designing the vehicles, emphasizing the importance of taking a supercomputer and artificial intelligence as the base. Perhaps critiquing other companies on this list, Nvidia has said it is much less effective to just add new tech to existing cars.
There is one more thing to note. Nvidia closed a deal on Monday to acquire Arm Holdings from SoftBank (OTCMKTS:SFTBY) for $40 billion. That said, such an acquisition would give Nvidia a leg up for further autonomous vehicle innovation.
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On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.
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