In this piece, we will take a look at the ten best self-driving stocks to invest in. If you want to skip our industry introduction, and want to jump ahead to the top five stocks in this list, then take a look at 5 Best Self-Driving Stocks To Invest In.
The boom in information technology has disrupted and revolutionized a wide variety of industries and brought new technologies to the consumer. One such area is the autonomous driving sector, which uses advanced technologies such as machine learning to predict the road environment and minimize the input required from a driver while driving.
This allure of self-driving technologies has piqued investor interest and resulted in making Elon Musk one of the richest people in human history. While it is widely believed that Musk's net worth — courtesy of the meteoric share price increase of his company Tesla, Inc. (NASDAQ:TSLA)'s shares — is due to electric vehicles, the reality is that investors have also bet on Tesla's vast pool of vehicle data that the company is using to train algorithms for autonomous driving.
Taking a look at industry research reports for the sector, we find out that several firms have laid down optimistic projections for autonomous driving. For instance, Fortune Business Insights estimates that from a value of $1.64 billion from the end of last year, this market will grow at a strong compounded annual growth rate (CAGR) of 31.3% to stand at $11.3 billion as 2028 ends.
Precedence Research also takes a wager at estimating the number of units in the market, and projects that by 2030 end, there will be 65 million self-driving cars on the roads. It also lays down current and future market values in dollar terms alongside a growth rate, outlining that the market was worth $15 billion in 2021 and will be worth $21 billion by 2030 through a CAGR of 3.97%. Asia Pacific will fuel this growth as the living standards of populations increase and a high number of people belonging to the working age group spearhead their automobile purchases.
Finally, Markets and Markets also believes that there were 20.3 million autonomous driving units on the roads in 2021 and this will grow to 62.4 million in 2030 through a 13.3% CAGR. It also explains that Asia Pacific will drive this growth and outlines that autonomous driving also has advantages for the ride sharing market as it has the potential to drastically reduce the costs per mile paid by passengers. However, the most optimistic take for the sector's monetary value is from Allied Markets Research, as the firm pegs down the value of the global autonomous vehicle market to a whopping $2 trillion by 2030 through an unbelievable CAGR of 40%.
Our list consists of a variety of firms, some of which sell cars while others focus on trucks and components used in self-driving. Some of the popular names likely to catch your attention are NVIDIA Corporation (NASDAQ:NVDA) and Alphabet Inc. (NASDAQ:GOOG).
We took a look at the broad self-driving and autonomous vehicle industry to determine which companies are present in the sector, and following this, the firms were analyzed through their business models, financial health, and relevant developments to gauge which might end up being strong players. The companies were then ranked according to hedge fund sentiment courtesy of Insider Monkey's 912 fund survey for their Q1 2022 holdings.
Best Self-Driving Stocks To Invest In
10. Volkswagen AG (OTCMKTS:VWAGY)
Number of Hedge Fund Holders: N/A
Volkswagen AG (OTCMKTS:VWAGY) is a German automobile manufacturer that is headquartered in Wolfsburg, Germany. The company has its own software stack dubbed Cariad that will provide autonomous driving up to level 4 to its vehicles. It is also rumored to be interested in acquiring Huawei's autonomous driving unit.
Volkswagen AG (OTCMKTS:VWAGY) is one of the largest car companies in the world and it is also taking up a strong position in the electric vehicle market. Despite the auto industry facing significant headwinds, Volkswagen AG (OTCMKTS:VWAGY) grew its inventory turnover ratio in 2021 and Q1 2022, indicating that it continued to ship vehicles even as the market struggled. The company's EBITDA per share is also at a high level, which when combined with a low EV/EBITDA ratio suggests an undervaluation.
RBC Capital raised Volkswagen AG (OTCMKTS:VWAGY)'s share price target to EUR316 from EUR310 in August 2022.
Along with Tesla, Inc. (NASDAQ:TSLA), NVIDIA Corporation (NASDAQ:NVDA), and Alphabet Inc. (NASDAQ:GOOG), Volkswagen AG (OTCMKTS:VWAGY) is a hot self-driving stock.
9. Toyota Motor Corporation (NYSE:TM)
Number of Hedge Fund Holders: 9
Toyota Motor Corporation (NYSE:TM) is one of the largest and oldest car companies in the world, as it was founded in 1933 and is headquartered in Toyota, Japan. The company plans to launch a self-driving software by 2025 which will control basic car systems such as brakes and the steering wheel.
Toyota Motor Corporation (NYSE:TM) is growing heavily in the self-driving space, as it has bought two key companies, Lyft and Renovo, to expand its portfolio. The company also pays out a 63 cent dividend per share for a 1.55% yield. As it battles supply chain and semiconductor headwinds, Toyota Motor Corporation (NYSE:TM) is also expected by analysts polled by S&P Capital IQ to grow its operating income by 38% and revenue by 13% by the end of this year.
Insider Monkey's 912 hedge fund survey for the first quarter of this year revealed that nine had bought the company's shares.
Toyota Motor Corporation (NYSE:TM)'s largest investor is Ken Fisher's Fisher Asset Management which owns 5 million shares that are worth $925 million.
Baron Funds mentioned the company in its Q1 2022 investor letter. Here is what the fund said:
“Toyota’s (NYSE:TM) “kaizen” manufacturing philosophy is based on improving manufacturing by using “just in time” processes to eliminate waste and reduce inventory carrying costs. Clearly the company does not contemplates disruptive change that will dramatically lower costs and improve quality.”
8. Ouster, Inc. (NYSE:OUST)
Number of Hedge Fund Holders: 19
Ouster, Inc. (NYSE:OUST) is an American company that sells several kinds of sensors that are used in self-driving vehicles. These include high resolution Lidar sensors, a scanning sensor, and a solid state flash sensor. It is headquartered in San Francisco, California
Ouster, Inc. (NYSE:OUST) has the highest market share among its Lidar peers, as it held 32% of the market as of April 2022. This is despite the fact that it is not the largest Lidar company in terms of market capitalization, a fact which hints at a potential undervaluation. Additionally, it has the highest average selling price (ASP) per sensor and a gross margin of 27% - both key factors for a young company,
Cantor Fitzgerald set a $9 share price target for the company in June 2022, as it shared that a strong customer base and product portfolio are key strengths for the company. Insider Monkey scanned 912 hedge fund portfolios for Q1 2022 to discover that 19 had held a stake in Ouster, Inc. (NYSE:OUST).
7. TuSimple Holdings Inc. (NASDAQ:TSP)
Number of Hedge Fund Holders: 17
TuSimple Holdings Inc. (NASDAQ:TSP) is an American company headquartered in San Diego, California. The firm develops autonomous driving software and technology that specifically targets semi trucks for use in the United States and other countries.
The key fact about TuSimple Holdings Inc. (NASDAQ:TSP) is that it is the leader in global autonomous technologies for semi trucks, a market that is worth billions of dollars. The U.S. market alone is worth $800 billion and TuSimple Holdings Inc. (NASDAQ:TSP)'s autonomous freight network (AFN) route has a TAM that goes as high as $13 billion. There is strong interest in the company's technology due to the facts that 94% of accidents are due to human errors, 61% of a truck's total cost per mile comes from drivers, and there is a truck driver shortage in the U.S.
Baird kept an Outperform rating on TuSimple Holdings Inc. (NASDAQ:TSP)'s shares in August 2022 but reduced the price target to $11 from $17, sharing that while the balance sheet changes influenced the decision, there are strong tailwinds to the stock that influenced the rating.
17 out of the 912 hedge funds polled by Insider Monkey during this year's first quarter had bought the company's shares.
Out of these, Catherine D. Wood's ARK Investment Management is TuSimple Holdings Inc. (NASDAQ:TSP)'s largest investor. It owns 13 million shares that are worth $158 million.
6. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 26
XPeng Inc. (NYSE:XPEV) is a Chinese company that designs and sells smart vehicles in the East Asian country. The company's portfolio of cars includes sports utility vehicles (SUVs), sports sedans, and family sedans. It also offers charging facilities and other services related to its vehicles.
XPeng Inc. (NYSE:XPEV) is one of the fastest growing Chinese electric vehicle manufacturers, which is crucial given the relevance of the country to the industry's future as we highlighted in our industry introduction above. Its July sales data saw sales grow by 43% annually, allowing XPeng Inc. (NYSE:XPEV) to surpass all its rivals in terms of growth. The company is also expected to grow its revenue by 81% this year and 77% next year. XPeng Inc. (NYSE:XPEV)'s autonomous driving software is currently in beta testing.
Insider Monkey's 912 hedge fund survey for this year's March quarter saw 26 as having held stakes in the company.
XPeng Inc. (NYSE:XPEV)'s largest investor is Philippe Laffont's Coatue Management which owns 2 million shares that are worth $77 million.
NVIDIA Corporation (NASDAQ:NVDA), Tesla, Inc. (NASDAQ:TSLA), and Alphabet Inc. (NASDAQ:GOOG) are met by XPeng Inc. (NYSE:XPEV) in our list of top self-driving stocks.
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Disclosure. None. 10 Best Self-Driving Stocks To Invest In is originally published on Insider Monkey.