In this article, we will look at the 10 Best Self Driving Car Stocks To Buy Now
Advancements in artificial intelligence, data analysis, and machine learning are shaping how industries perform today. These three technological advancements have enhanced the potential of autonomous vehicles and Advanced Driver Assistance Systems (ADAS).
However, are the consumers ready to put their hands off the driving wheel and trust self-driving vehicles? Let’s explore how the autonomous driving industry is progressing with almost all major automotive manufacturers investing significantly to put their Full Self Driving (FSD) cars on the road.
The Global Autonomous Vehicle Industry
According to a report by Mordor Intelligence, the global autonomous vehicle market is valued at $41.10 billion in 2024. The market is expected to grow at a compound annual growth rate of 22.75% to reach $114.54 billion by 2029. The COVID-19 pandemic hindered the overall output of the automotive industry thereby delaying the production and roll-out of self-driving cars. In addition, increased government regulations to ensure road safety have also proved to be a barrier for automakers. However, with significant improvement in software and hardware technology backed by artificial intelligence, we see automakers rolling out their Level 2 and Level 3 autonomous cars on public roads.
For instance, on June 25 CNBC reported that Waymo a leading autonomous vehicle company, opened its self-driving robot taxis for users in San Francisco. The company claims that more than 300,000 people signed up for the service. To cater for the growing number of users Waymo One has rolled out a fleet of 300 cars in the city.
According to a survey by McKinsey & Company, automotive market leaders believe the autonomous segment to be less fragmented due to the complexity and investment involved in its operations. As per the survey, 15% of the respondents believe North America will have most companies working and deploying autonomous technology in the future. In contrast, 38% of respondents believe the European market to be led by at most two or three companies.
Regionally speaking, China and North America are leading the race to become the first countries to roll out Level 4 highway pilot technology. Respondents of the survey are equally divided with 58% believing either country could be the first in Level 4 technology.
As mentioned above, developing and rolling out autonomous vehicles requires a huge investment in software technology. However, the investment is also expected to return high margins. The survey found that experts believe autonomous vehicle software is expected to have an average margin of 15% and hardware technology will add another 10% to the margin, thereby making the autonomous vehicle segment a lucrative venture for automotive companies.
Latest Trends in the Autonomous Vehicle Industry
Emerging trends in the autonomous vehicle industry are paving the way towards achieving level 5 autonomy. Some of the latest developments in the industry include, the use of Internet of Things (IoT) to allow vehicles to connect with other vehicles, its environment, and the internet. This not only improves the vehicle safety by providing quick data acquisition and analysis to make timely decisions based on the traffic changes on the road. New sensor technologies such as the LiDAR scans the surrounding of the car using laser technology. When these LiDAR sensors move continuously using multiple laser sensors they create a 3D representation of the surrounding ensuring the vehicle drives safely without collision. Almost all level 3 autonomous vehicles use LiDAR scanners to enhance vehicle visibility to around 300 meters during daytime.
Moreover, advancements in artificial intelligence such as object detection algorithms along with the LiDAR help the vehicle detect pedestrians, traffic signs, and other vehicles on the road. Other deep learning algorithms are helping improve the user experience by enhanced voice recognition, gesture recognition, and sentiment analysis to help interact with the vehicle efficiently. Last but not the least, Big Data analysis techniques are being utilized by autonomous automakers to improve vehicle autonomy through analyzing data collected through radars, scanners, and cameras.
Now that we have discussed the autonomous vehicle industry. Let’s take a look at the 10 best self-driving car stocks to buy now.
A closeup of a self-driving hardware unit inside the dashboard of a passenger vehicle.
Our Methodology
To compile the list of the 10 best self-driving car stocks to buy, we looked at autonomous driving stock holdings of the Global X Autonomous & Electric Vehicles ETF. We selected the top 20 stocks from the ETF holdings and ranked the stocks that were the most widely held by institutional investors, as of Q1 2024. The list is in ascending order of the number of hedge fund holders for each stock.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Self-Driving Car Stocks To Buy Now
10. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 41
Ford Motor Company (NYSE:F) is one of the best autonomous driving stocks, we say this because the stock was held by 41 hedge funds in Q1 2024, with total stakes worth $1.54 billion. Renaissance Technologies is the top shareholder of the company with a position worth $44.7 million.
Ford Motor Company (NYSE:F) is a renowned automotive company that develops, delivers, and services trucks, commercial cars, vans, sports and luxury vehicles. The company also helps its customers with various financing options including loans leases, and dealer financing. Ford Next segment of the company focuses on the development cost of autonomous vehicles and related businesses including, equity ownership in Argo AI, and other next-generation automotive technologies.
In a recent interview with Bloomberg, Ford Motor Company (NYSE:F) CEO revealed the company has achieved level 3 autonomous driving in its prototype vehicles. This marks a significant step towards the company’s pursuit of advanced driver assistance system. As of now the company has already launched Level 2 autonomy following its launch of BlueCruise technology that allows hands free driving.
The company posted mixed results for the second quarter of 2024. The Ford Pro business, which specializes in catering for the commercial sector including fleet management, comprehensive vehicle solutions for business needs, maintenance and financing services reported high margins and revenue. The Ford Pro revenue increased by 9% during the quarter amounting to $70 billion and contributed a solid $2.6 billion to the EBIT of the company with margins at over 15%. The growth in the segment was on the back of a 3% increase in wholesalers during the quarter.
Ford Motor Company (NYSE:F) faced some headwinds during the quarter. Its Ford Model E went down by $1.1 billion due to industry price pressures and a wholesale decline in this segment. Moreover, the loss in the Ford Model E along with a spike in warranty costs drove the company’s earnings 35% lower to $0.47 per share. Management expects the technology-related warranty costs to normalize in the future as the technology matures and the company can deploy Over the Air (OTA) capabilities to address technology issues.
On the positive side, the company was able to grow its overall revenue by 6% to $47.8 billion during the quarter. Moreover, Ford Motor Company (NYSE:F) also performed well financially and generated adjusted free cash flow worth $3.2 billion up $0.3 billion year-over-year.
The competitive edge of the company lies in its ability to lead the market with its brand reputation. The company has led the US automotive market for 3 consecutive years and continues to do so from the Q1 of 2024. Ford Motor Company (NYSE:F) is cheap at current levels. It is trading at 5 times its forward earnings, a 65% discount to its sector. Moreover, its earnings are also expected to grow by 59% during the year to reach $0.46. 26 analysts have a consensus Buy opinion on the stock, with their median price target of $13 presenting an upside of 33% from current levels.
9. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 48
Baidu, Inc. (NASDAQ:BIDU) is a leading technology company in China, known for its advancements in artificial intelligence and autonomous driving technologies. The company operates through two main business segments Baidu Core and iQIYI. Baidu Core segment deals in marketing and non-marketing services, and accounts for over 70% of the revenue. One of the key growth engines of the company includes Intelligent Driving & Other Growth Initiatives, which engages in intelligent driving as well as smart devices powered by DuerOS smart assistant and AI chip development.
Baidu, Inc. (NASDAQ:BIDU) is one of the best autonomous vehicle stocks. It was held by 48 hedge funds in Q1 2024, with total stakes worth $1.43 billion. Antipodes Partners is the top shareholder of the company with a position worth $53.25 million as of August 11.
The company posted a first quarter of 2024, with Baidu Core revenue growing 4% year-over-year to RMB 23.8 billion. The growth in this segment was on the back of strong performance in both marketing and non-marketing revenue, which increased by 3% and 6% respectively. Management is transforming the company from an internet search engine company to an AI-first business.
Baidu, Inc. (NASDAQ:BIDU) also leads in the intelligent driving market and made significant growth during the quarter. Apollo Go, which is one of the largest autonomous ride-hailing services, saw a 25% increase in ride bookings year-over-year to reach 826,000 rides during the quarter. The company is also moving towards achieving unit economies breakeven for Apollo Go and is enhancing its market share of rides in Wuhan city. In Q1, autonomous rides accounted for 55% of the total rides in the city, up from 45% during the last quarter.
What sets Baidu, Inc. (NASDAQ:BIDU) as one of the best self-driving car stocks is its ability to capture its regional market and ensure a smooth transition. Currently, Apollo Go has become an integral part of the city’s transportation network. Moreover, the company has been able to achieve this while decreasing its operating expenses by 2% year-over-year and reaching an operating income of RMB 5.5 billion.
BIDU presents an attractive entry point for investors because it is trading at 8 times its forward earnings, a 38% discount to its sector. Moreover, it has shown remarkable progress during the past decade by growing its top line by 14% and bottom line by 6%. 48 analysts have a Strong Buy rating on the stock, with their 12-month median price target of $136.47 presenting an upside of 58% from current levels.
Ariel Global Fund stated the following regarding Baidu, Inc. (NASDAQ:BIDU) in its fourth quarter 2023 investor letter:
By comparison, China’s internet search and online community leader, Baidu, Inc. (NASDAQ:BIDU) traded lower alongside Chinese equities as intensifying problems in China weighed on investor sentiment during the period. The company continues to invest heavily in Artificial Intelligence (AI) and recently launched its generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.
8. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 52
Honeywell International Inc. (NASDAQ:HON) is a diversified technology company that operates in the aerospace, automation, industrial automation, and energy solutions industries. The company through its Performance Materials and Technologies provides software applications that control and optimize automation including sensors, switches, control systems, and video surveillance. The company also offers consultation to manufacture automation end products including computer chips, controls for sensing, and other related software. It is one of the best autonomous driving stocks as it was held by 52 hedge funds in the first quarter of 2024, with total stakes worth $1.18 billion. Diamond Hill Capital is the top shareholder of the company, with a position worth $242.14 million as of August 11.
The company plays an integral part in the autonomous vehicle industry by providing advanced technologies that enhance safety, accuracy, and operations to automotive manufacturers. For instance, Honeywell’s Inertial Measurement Units are pertinent for the functionality of these vehicles, they help determine exact location and trajectory of autonomous cars. VSI labs, which is a leading researcher of active safety and automated vehicle technology is using Honeywell’s IMUs to determine standards for successful self driving cars.
Honeywell International, Inc. (NASDAQ:HON) posted a strong second quarter of 2024, with both revenue and earnings beating analyst estimates. The company’s organic sales grew 4% year-over-year to reach $9.6 billion, beating the expectations of $9.4 billion. Moreover, the company reported earnings per share of $2.49 again beating analyst expectations of $2.42. The growth in sales was led by its Commercial Aerospace, Defense and Space, and Building Solution segments, which posted double-digit organic sales of 16% during the quarter. In addition, Honeywell International, Inc. (NASDAQ:HON) was also able to increase its order backlog by 5% during the quarter to maintain the record level of $32 billion. Financially speaking the company was able to keep its free cash flow flat at $1.1 billion year-over-year. The company’s full-year guidance sits at organic sales growth of 5% to 6%, with overall margins between 23.3% and 23.5%.
Should you invest in Honeywell International Inc. (NASDAQ:HON)?
The company has not only delivered a strong financial 2nd quarter of 2024 but has a history of generating stable revenue. The company has grown its revenue by 3.21% and net income by 6.09% over the past 3 years. 26 analysts have a consensus Buy opinion on the stock, with their 12-month median price target of $226 presenting an upside of 14% from current levels.
7. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 74
Tesla, Inc. (NASDAQ:TSLA) is a leading electric vehicle and renewable energy company based in the United States, with operations running internationally. The Automotive segment of the company offers electric vehicles, automotive regulatory credits, after-sale parts, and maintenance services. The company is one of the pioneers in autonomous vehicle technology and focuses on developing advanced driver assistance systems and is working towards developing fully autonomous self-driving cars.
CEO of the company, Elon Musk, who is also the richest man in the world has ambitions for the automation industry and has introduced “robotaxis” which would operate without a human driver. Tesla, Inc (NASDAQ:TSLA) is one of the best autonomous vehicle stocks and was held by 74 hedge funds during the Q1 of 2024, with total stakes worth $4.95 billion. ARK Investment Management is the top shareholder of the company with position worth $1.05 billion.
The company posted record quarterly revenues and profits in Q2 of 2024, despite increased competition in the EV market. Tesla, Inc. (NASDAQ:TSLA) was able to grow its revenue by 2% year-over-year to reach $25.5 billion and its total gross profits grew by 1% to reach $4.58 billion. The revenue growth was on the back of strong performance in the Energy generation and storage segment. In the second quarter, the company reached 9.4 GWh deployments resulting in revenue generation of more than $3 billion, indicating a 100% increase year-over-year.
The company was able to remain profitable on the financial front as well and generated $1.34 billion in free cash flow, a 34% increase from last year. Moreover, the company’s cash and cash equivalents and investments also grew 33% during the same time.
What sets Tesla Inc. (NASDAQ:TSLA) apart from its competitors is its advancements in the autonomous vehicle category. Management during the latest earnings call indicated having made significant progress in Full Self-Driving and Robotaxi, with version 12.5 beginning to roll out.
Moreover, the ambitions of management make Tesla, Inc. (NASDAQ:TSLA), what analysts call a “story stock”, where investors are willing to pay a premium not based on the current price but on what the company can achieve in the future. The company has been able to grow its top-line and bottom-line by 32% and 79% respectively during the past 3 years. 56 analysts have a consensus Buy rating on the stock, with their median price target of $225 presenting an upside of 17.33% from current levels.
Alger Focus Equity Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q1 2024 investor letter:
Tesla, Inc. (NASDAQ:TSLA) is an electric vehicle manufacturer with a technological lead in its large and rapidly growing addressable market. In our view, Tesla is a transportation company that is setting the pace for industry innovation. During the quarter, shares detracted from performance after the company reported fiscal fourth quarter results, where revenues and earnings missed analysts’ estimates. Weaker-than-expected automotive revenues were partly driven by a reduced average selling price, which was down 15% year-over-year. Moreover, management decided to forgo providing volume guidance, though they did acknowledge they are in a lower growth phase given the uncertain consumer environment particularly as it relates to high ticket purchases.
6. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 78
General Motors Company (NYSE:GM) is one of the leading automotive designers and manufacturers of cars, trucks, and automotive parts in the US and internationally. The company operates through the following segments GM International, GM North America, GM Financial, and Cruise. General Motor Company (NYSE:GM) is one of the best autonomous vehicle stocks as it was held by 78 hedge funds in Q1 2024, with total stakes worth $4.79 billion. Diamond Hill Capital is the top shareholder of the company, with a position worth $496.71 million as of August 11.
General Motors Company (NYSE:GM) is actively involved in the development and deployment of autonomous vehicles through its subsidiary Cruise. The company has been testing its vehicles in various locations; one of the latest developments during Q2 of 2024 was the restart of self-driving vehicle operations in Houston, Phoenix, and Dallas.
The company has been making notable advancements in both the electric and autonomous vehicle categories. During the second quarter, General Motors Company (NYSE:GM) was able to improve its US electric vehicle deliveries by 34% subsequently, demonstrating strong momentum in its EV portfolio. On the autonomous vehicle front, the company was able to reduce its Cruise operational expenses by $150 million year-over-year, reflecting operational sustainability and technological advancement in production. Overall, the company was able to grow its revenue by 7% year-over-year to reach $48 billion on the back of higher wholesale volumes and stable prices across North America.
The competitive edge of the General Motors Company (NYSE:GM) lies in its ability to capitalize on the automotive market through its sales volumes and its investment spending in research and development. Management of the company has been focused on reducing regulatory concerns related to its AV vehicle and has decided to focus their next generation autonomous vehicle on the Chevrolet Bolt EV instead of the Origin. This is a strategic move, which will not only alleviate regulatory concerns but will also reduce per-unit costs.
General Motors Company (NYSE:GM) presents an attractive entry point for investors. It’s trading at 4 times its forward earnings, which is a 72% discount to its sector. Moreover, the earnings of the company are also expected to grow by 52.4% during the year to reach $1.89. 29 analysts have a consensus Buy opinion on the stock, with their median price target of $55 presenting an upside of 27% from current levels.
Diamond Hill Large Cap Strategy stated the following regarding General Motors Company (NYSE:GM) in its first quarter 2024 investor letter:
Other top contributors included Allstate, Caterpillar and General Motors Company (NYSE:GM). Automobile manufacturer General Motors continues capitalizing on the shift to electric vehicles (EVs) while maintaining the strength of its core gas-engine truck and SUV business. Though it has experienced some setbacks — such as needing to roll back its Cruise driverless car project — we believe the company remains well-positioned relative to secular tailwinds within the automobile business.
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 78
QUALCOMM Incorporated (NASDAQ:QCOM) is a leading technology company that develops backend technologies for various wireless technology industries. The company operates through three main segments including Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). The QSI segment invests in early-stage tech companies including 5G, artificial intelligence, and automotive technologies.
QUALCOMM Incorporated (NASDAQ:QCOM) has introduced its Snapdragon Ride platform that provides advanced solutions for automated driving and advanced driver assistance systems (ADAS). Its connectivity and digital cockpit solutions connect cars to their environment and the cloud to create a unique user experience and allow automated driving.
The company posted a successful third quarter of 2024, with revenue growing across the board. The overall revenue of the company grew by 11% year-over-year to reach $9.4 billion. Along with the revenue, the earnings of the company also grew significantly. The earnings before tax and earnings per share both grew 25% year-over-year to reach $3 billion and $2.33 billion, respectively.
The most notable financial improvement for the company came from its QCT segment, which grew 12% year-over-year to reach $8.1 billion. Growth in this segment was on the back of strong performance in both IoT and automotive sectors.
The strong position of QUALCOMM Incorporated (NASDAQ:QCOM) in the autonomous vehicle segment can be estimated by the fact that it delivered the 4th consecutive quarter of record QCT automotive revenues. The automotive revenue of $811 million was up 87% year-over-year, reflecting growth in new vehicle launches and increased supply of integrated technology solutions to the automotive industry.
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the best autonomous vehicle stocks to buy, we say this because it was held by 78 hedge funds in Q1 2024, with total stakes worth $4.60 billion. Renaissance Technologies is the top shareholder of the company, with a position worth $218.46 million. It is also cheap at current levels because it is trading at 16 times its forward earnings, a 28% discount to its sector. Moreover, 39 analysts have a consensus Buy opinion on the stock, with their 12-month median price target of $212.5 presenting an upside of 29% from current levels.
O’keefe Stevens Advisory stated the following regarding QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter:
During the quarter, the A.I. rally broadened beyond the obvious players of Nvidia, AMD, and hyperscalers. QUALCOMM Incorporated (NASDAQ:QCOM), a long-standing investment, is gaining recognition for integrating artificial intelligence into mobile phones. Qualcomm’s A.I. on-device capabilities enable real-time language translation, improved voice recognition, and sophisticated imaging techniques as A.I. becomes more integral to mobile experiences. Qualcomm benefits by leading the market in providing robust, efficient, and versatile A.I. solutions. A.I. could be the first technology advancement in several years to accelerate the smartphone replacement cycle as users desire these advanced capabilities.
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 186
NVIDIA Corporation (NASDAQ:NVDA) is a leading technology company that specializes in graphic processing units and computing solutions for an array of industries including gaming, data canters, autonomous automotive, professional visualization, and much more. NVIDIA Corporation’s (NASDAQ:NVDA), NVIDIA Drive Platform provides end-to-end solutions to support the development of autonomous driving technology.
The company posted a successful first quarter of 2025, with revenue growing 262% year-over-year to $26 billion backed by exceptional performance in its Data Center and Gaming segments. The Data Center revenue was up 427% year-over-year to reach $22.6 billion during the quarter, driven by the NVIDIA Hopper GPU used for training LLMs, recommendation engines, and generative AI. Management believes the automotive sector to be one of the key vertices within its Data Center segment and expects Auto to be the largest vertical driving multi-billion revenue opportunity during the year.
The automotive revenue of the company grew 11% year-over-year to reach $329 million and was primarily driven by the self-driving platforms. NVIDIA Corporation (NASDAQ:NVDA) has experienced a ramp-up in its AI cockpit solutions and global OEM customers translating to its subsequent growth in revenue.
The competitive edge of the company lies in its huge market capitalization and its ability to collaborate with leading automakers to deliver autonomous driving solutions. Some of the notable achievements for the company during the quarter include the successful launch of Xiaomi’s first electric vehicle built on NVIDIA Orin. Moreover, the company has also announced new design wins for its NVIDIA Drive Thor quoting significant partnerships with BYD, XPENG, Nuro, and GAC’s AION Hyper.
NVIDIA Corporation (NASDAQ:NVDA) is one of the best autonomous vehicle stocks because it was held by 186 hedge funds in Q1 2024, with total stakes worth $48.30 million. Renaissance Technologies is the top shareholder of the company with a position worth $867.5 million, as of August 11. 61 analysts have a Strong Buy rating on the stock, with their median price target of $140 presenting an upside of 34% from current levels.
Patient Capital Opportunity Equity Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
NVIDIA Corporation (NASDAQ:NVDA) continued to lead both the market and the portfolio, remaining a top performer in the period gaining 36.7%. Nvidia is the market leader in designing and selling Graphics Processing Units (GPU), which has recently benefited from the insatiable demand of artificial intelligence (AI) models. The company currently captures 92% market share of data center GPUs and grew revenue, earnings and free cash flow (“FCF”) an astounding 126%, 392%, and 610%, respectively, over the last year. While we expect competition to increase, we think NVDA can continue to maintain top market share. While many are concerned with backlog times shortening, we think the rollout of the B100, which promises 2.5x better performance for only 25% more cost, later this year will create more shortages. With leading edge technology, an increasing innovation cycle and strong cash generation, the company is well positioned for the increased adoption of artificial intelligence (AI).
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 222
Alphabet Inc. (NASDAQ:GOOG) is a multinational technology conglomerate that offers various products and platforms internationally. It is the parent company of Google and other subsidiaries including Waymo, which focuses on developing autonomous vehicle technology.
Waymo started as Google’s self-driving car project and has progressed to become a leader in the autonomous vehicle industry. The subsidiary has served more than 2 million trips to date and has successfully driven 20 million autonomous hours on the road. Waymo makes Alphabet Inc. (NASDAQ:GOOG), one of the best autonomous vehicle stocks to buy. It was held by 222 hedge funds during the Q1 of 2024, with total stakes worth $19.75 billion. Cantillon Capital Management is the top share holder of the company with a position worth $837.24 million.
Alphabet Inc. (NASDAQ:GOOG) delivered a strong second quarter of 2024, with consolidated revenue growing 14% year-over-year to reach $84.7 billion. Growth in revenue due to strong performance across the board. The Google Cloud revenue made history by crossing the $10 billion mark for the first time and the operating profits reached over $1 billion for the quarter. Revenue for the Google services also went up by 12% year-over-year to reach $73.9 billion.
An overall strong revenue growth resulted in the net income growing to $23.6 billion during the quarter with free cash flow generation of $13.5 billion. This strong financial position of the company provides significant growth opportunities for its autonomous vehicle subsidy, Waymo. Alphabet Inc. (NASDAQ:GOOG) allocated $5 billion worth of funds for Waymo to support its ongoing operations, thereby indicating management’s commitment to the cause. Waymo is now delivering over 50,000 weekly paid public rides in San Francisco and Phoenix, with testing ongoing in the Bay Area.
The company has a history of growth. It has been able to grow its top-line and bottom line by 18% and 21%, respectively over the last decade. 62 analysts have a consensus Buy rating on the stock, with their median price target of $205 presenting an upside of 24% from the current level.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 293
Microsoft Corporation (NASDAQ:MSFT) is a leading developer and provider of support software, services, devices, and solutions. The company is driven by its significant advancement in artificial intelligence and cloud services, including Azure AI and Copilot.
The solution software and cloud services provided by Microsoft Corporation (NASDAQ:MSFT) are used in an array of industries including the mobility and automation sector. The company leverages its Azure software to provide a robust infrastructure for autonomous vehicle operations, including data ingestion, processing, analysis and development of machine learning models required to power autonomous driving systems.
Microsoft Corporation (NASDAQ:MSFT) is working with multiple leading automotive companies to accelerate developments in automation. Some of the prominent names working with Microsoft Corporation (NASDAQ:MSFT) include Wayve, a London-based company pioneering deep learning for autonomous vehicles and Wejo Group Limited, a leader in connected vehicle data.
The company posted a successful fourth quarter of 2024. Its revenue was up 15 year-over-year to reach $245 billion. Revenue growth was due to strong performance across the board. The intelligent cloud segment revenue witnessed a notable increase of 19% year-over-year and reached $28.5 billion. Azure and other cloud services led the growth in this segment by improving service revenue by almost 30% during the year.
Due to the strong performance, Microsoft Corporation (NASDAQ:MSFT) was able to increase its operating income to $27.9 billion, a 15% increase year-over-year. Moreover, the balance sheet of the company also improved significantly with the free cash flow increasing 18% year-over-year to $23.3 billion. As the company continues to improve its cloud services and Azure with AI integration, its utility for the autonomous vehicle grows with it.
Microsoft Corporation (NASDAQ:MSFT) is a good investment, we say this because it was held by 293 hedge funds during the Q1 of 2024, with stakes worth $88.16 billion. Impax Asset Management is the top shareholder of the company with a position worth $1.24 billion. 60 analysts have a Strong Buy rating on the stock, with their 12-month median price target of $498 presenting an upside of 23% from the current level.
Polen Focus Growth Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
The top absolute contributors were Alphabet, Microsoft Corporation (NASDAQ:MSFT), and Amazon. Microsoft was another top absolute contributor in the quarter, speaking to a growing appreciation for all the ways the company has an opportunity to monetize GenAI, be it in its Office suite or Azure cloud business. In the latter case, it contributed 7% to Azure’s revenue growth in the most recent quarter. We believe Microsoft remains a highly advantaged business with many secular tailwinds driving durable growth for the foreseeable future, even at its immense scale.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) operates in the retail sale of consumer products in North America and internationally. The company also offers Amazon Web Services and manufactures and sells electronic devices. The stock was held by 302 hedge funds in Q1 2024, with total stakes worth $60.37 billion. Diamond Hill Capital is the top shareholder of the company with a position worth $474.3 million.
The company expanded its operations in the autonomous vehicle segment when it acquired Zoox in 2020. Since then the company has made significant strides in autonomous vehicles and is developing fully autonomous robot taxis. Zoox unlocked a key milestone in February 2023, when it released its fully automated robot taxi on the roads of Foster City, California. Unlike its competitors, Zoox taxis are completely autonomous and have space for 4 adult passengers.
Moreover, Amazon.com Inc. (NASDAQ:AMZN) also plays a critical role in developing and deploying Advanced Driver Assistance Systems (ADAS). AWS offers a range of solutions tailored for the autonomous mobility industry, enabling companies to develop, test, and deploy their self-driving technologies efficiently. The company has entered into notable strategic partnerships with BMW, Lyft and Toyota for data processing, machine learning, and simulation capabilities.
The company posted a successful second quarter of 2024. Net sales of the company increased 11% year-over-year to reach $148 billion. Net sales were driven by strong growth in the AWS segment and grew 19% year-over-year to reach $26.3 billion. The AWS segment, which also provides ADAS to automotive companies, was able to grow its operational income by 7.2% subsequently reaching $9.3 billion.
What sets Amazon.com Inc. (NASDAQ:AMZN) apart from its competitors is its robust cloud infrastructure, which provides scalable computing power, storage, and advanced data analytics capabilities. For instance, Amazon EC2 enables high-performance computing, Amazon S3 allows data storage, and Amazon SageMaker service has accelerated the autonomous driving capabilities of its subsidiary Zoox.
Amazon.com, Inc (NASDAQ:AMZN) has grown its top line by 22% and bottom line by 74% during the last 10 years. 65 analysts have a Strong Buy rating on the stock, with their 12-month median price target of $220 presenting an upside of 32% from current levels.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.
While we acknowledge the potential of Amazon.com, Inc. (NASDAQ:AMZN) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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