In this article, we will be taking a look at the 10 best autonomous vehicle ETFs and stocks to invest in.
With continuing development and innovation in emerging markets, alongside the rise of new technology, several industries across the globe have begun to be revolutionized. The automotive industry is no exception to this revolution, with the rise of autonomous driving and electrification. Traditional car makers are not the only ones with a stake in this new trend of autonomous driving either, as many tech companies are currently investing in, or setting up subsidiaries overseeing, autonomous driving.
Alphabet Inc. (NASDAQ:GOOG) and Micron Technology, Inc. (NASDAQ:MU) are two examples of the above. These tech giants are diving into the AV sector just as fast as companies like Aptiv PLC (NYSE:APTV), which is originally a traditional automotive parts manufacturer. Alphabet Inc. (NASDAQ:GOOG) has been dedicated to investing in the AV sector since 2009, and has continued to research autonomous driving over the years. The automotive industry as a whole is thus benefitting from this rising interest in autonomous driving. With billions being invested in rising technological developments in this industry, the automotive revenue pool’s additional revenue will increase by about 30% to $1.5 trillion by 2030, as noted by McKinsey & Company in a study on the automotive revolution. The study also mentioned that after major technological and regulatory issues surrounding AVs are resolved, as many as 15% of new cars sold in 2030 will be fully autonomous.
While autonomous driving may seem unrealistic and farfetched to some, major tech behemoths such as Alphabet Inc. and Tesla, Inc. (NASDAQ:TSLA) have continued to invest billions of dollars into the research and design of autonomous vehicles. According to CNBC this May, the AV market is expected to make up 12% of all new car registrations by 2030. In 2021, equity funding in autonomous vehicles reached $12 billion, showcasing a 50% increase in investment when compared to 2020. In the US, Alphabet Inc.’s (NASDAQ:GOOG) subsidiary company, Waymo, was the leading investor with $5.5 billion being poured into AV development and research. Many startups in the AV sector today have been supported by major traditional automakers looking to make autonomous driving a reality in the near future. Motional is one example of such a startup set up last year in a joint venture with Hyundai and pilots with Lyft.
The interest and investment in the AV sector have continued well into 2022. This July, according to Reuters, the US company State Farm joined with the Japanese Tokio Marine to pledge $111 million in funding for the AV tech startup May Mobility. Both auto insurers from the two countries have begun to provide crucial support to the AV sector with this move. The $111 million figure will aid May Mobility in its continuing work with Toyota Motor Corp. The startup has commented that it aims to rid cars of human drivers by next year, through its commercial operation to make autonomous vehicles widely available on the market.
Photo by ThisisEngineering RAEng on Unsplash
Let’s now take a look at the 10 best autonomous vehicle ETFs and stocks to invest in.
Our Methodology
Using Insider Monkey’s hedge fund data for the second quarter, we have selected autonomous vehicle stocks that have been popular among hedge funds in the recent quarter. The stocks mostly have positive analyst ratings and price targets, and they have positive growth potential. We have considered ETF returns relative to the S&P 500 and projected EPS growth over the next three to five years as some of the factors influencing our selection of these stocks and ETFs. They are ranked based on the number of hedge funds holding stakes in them, from the lowest to the highest.
Best Autonomous Vehicle ETFs and Stocks to Invest In
10. Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV)
Number of Hedge Fund Holders: N/A
Global X Autonomous & Electric Vehicles ETF is managed by Global X Management Company LLC. It invests in stocks of companies in the electric vehicles and autonomous vehicles sectors. The fund aims to track the performance of the Solactive Autonomous & Electric Vehicles Index, using the full replication technique.
As the Biden administration took over, Global X Autonomous & Electric Vehicles ETF was highlighted as a potential catch-all bet in light of indicators that the EV sector would be supported under the new government. The fund’s price return over the past three years was 81.9%, compared to a 34.1% return for the S&P 500. Global X Autonomous & Electric Vehicles ETF had a total return of 85.1% over the same period, compared to a 40.9% total return for the S&P 500.
Global X Autonomous & Electric Vehicles ETF, like Alphabet Inc., Micron Technology, Inc., and Aptiv PLC is an investment opportunity in the AV sector that many investors are keeping an eye on.
9. KraneShares Electric Vehicles & Future Mobility Index ETF (NYSEARCA:KARS)
Number of Hedge Fund Holders: N/A
KraneShares Electric Vehicles & Future Mobility Index ETF was launched and continues to be managed by Krane Funds Advisors, LLC. The exchange-traded fund invests in stocks of companies in the consumer discretionary, automobiles and components, automobiles, and EV sectors. It tracks the performance of the Bloomberg Electric Vehicles Index, using the representative sampling technique.
Over the past three years, KraneShares Electric Vehicles & Future Mobility Index ETF had a price return of 73.2%, compared to the S&P 500’s price return of 34.1%. The ETF’s total return was 88.6% over the same period, while the S&P 500 had a total return of 40.9%.
8. SPDR S&P Kensho Smart Mobility ETF (NYSEARCA:HAIL)
Number of Hedge Fund Holders: N/A
SPDR S&P Kensho Smart Mobility ETF is an exchange-traded fund launched by State Street Global Advisors, Inc., and managed by SSGA Funds Management, Inc. It invests in companies in the industrial and transportation sectors. Using the representative sampling technique, it aims to track the performance of the S&P Kensho Smart Transportation Index.
This June, SPDR S&P Kensho Smart Mobility ETF declared its quarterly distribution of $0.13, with a 30-day SEC yield of 1.06%. The ETF’s price return was 42.5% over the past three years, compared to the S&P 500’s 34.1% price return. SPDR S&P Kensho Smart Mobility ETF’s (NYSEARCA:HAIL) total return of 47.9% over the same period also outperformed the S&P 500’s total return of 40.9%.
7. Magna International Inc. (NYSE:MGA)
Number of Hedge Fund Holders: 20
Magna International Inc. (NYSE:MGA) is an auto parts and equipment company. The company dived into the autonomous driving sector with its MAX4 fully autonomous driving platform. The platform can be easily integrated into any vehicle.
An Overweight rating was reiterated on Magna International Inc. shares on July 14, by analyst Adam Jonas at Morgan Stanley. Jonas also placed a $79 price target on the stock.
This June, Evercore ISI added Magna International Inc. to its Best Core Ideas list, commenting that the company could be a sleeping AutoTech and EV giant. The firm cited Magna International Inc.’s (NYSE:MGA) EV production capabilities and status as a top five global supplier in the AV and EV sectors as evidence for its claims. Evercore ISI saw an upside to $150 for the stock.
Magna International Inc. was found in the 13F holdings of 20 hedge funds in the second quarter of 2022. Their total stake value in the company was $175 million. Of these funds, Point72 Asset Management was the largest stakeholder in the company, holding 687,535 shares worth $37.7 million.
Vltava Fund, an investment management firm, mentioned Magna International Inc. in its fourth quarter 2021 investor letter. Here’s what it said:
“Of course, not all of our companies are doing better than we expected. Magna fell somewhat short of our expectations last year. In the cases of Magna, reasons are disruptions in the supply and logistics chains. Magna, as a major automotive supplier, suffers indirectly from the same chip shortages as does BMW, for example. In Magna’s case, the trouble is that it does not have the same kind of pricing power vis-à-vis its customers as does BMW, and the lower and irregular production is negatively reflected in its profitability.”
6. Aptiv PLC (NYSE:APTV)
Number of Hedge Fund Holders: 43
Aptiv PLC is a manufacturer of vehicle components, operating worldwide. The company develops and commercialized autonomous vehicles and systems, and is continuing with its joint venture alongside Hyundai, Motional, for this purpose. It further offers electrical, electronic, and safety technology solutions to the automotive and commercial vehicle markets.
On August 5, Brian Gesuale kept his Outperform rating on Aptiv PLC shares. The analyst also placed a $145 price target on the stock.
This July, Oppenheimer noted that Aptiv PLC continues to avoid harm to consumer demand for their products in light of price increases. Consumer demand has remained strong and Oppenheimer sees supply chain constraints easing in the second half of 2022.
Impax Asset Management was the largest stakeholder in Aptiv PLC in the second quarter, out of 43 hedge funds long the stock. Ian Simm’s fund held about 4.7 million shares in the company, worth $417 million. The total stake value in the company was $1.6 billion.
ClearBridge Investments, an investment management firm, mentioned Aptiv PLC in its first quarter 2022 investor letter. Here’s what they said:
“The acceleration in electrification of transport should support electric vehicle (EV)-related stocks like Aptiv (NYSE:APTV), which came under pressure in the quarter on concerns the auto cycle is past its peak. Aptiv provides a range of solutions for the auto industry, including autonomous driving technologies, safety technologies, components, and wiring. The large exposure of APTV to EVs should lead to long-term value as EVs continue their growth, boosted by their relative attractiveness as prices at the pump hit near-historic highs.”
Like Alphabet Inc. and Micron Technology, Inc., Aptiv PLC is a strong AV stock pick hedge funds are piling into today.
5. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 45
Baidu, Inc. (NASDAQ:BIDU), a Chinese tech company, delved into the AV sector in 2014. The company develops AV software and recently announced that it would be producing Level 4 autonomous cars as well.
Alex Yao, an analyst at JPMorgan, upgraded Baidu, Inc. shares from Neutral to Overweight on August 31. The analyst also raised his price target on the stock from $160 to $200.
This September, Baidu, Inc. shares rose in light of the JPMorgan upgrade. Analyst Yao raised his 2022 and 2023 EPS estimates for the company by 20% and 22%, respectively, in light of Baidu, Inc.’s (NASDAQ:BIDU) robust second-quarter results.
Baidu, Inc. had 45 hedge funds long its stock in the second quarter. Their total stake value was about $2.1 billion.
Horos Asset Management, an investment management firm, mentioned Baidu, Inc. in its first quarter 2022 investor letter. Here’s what the firm said:
“Although the initial reaction of the Chinese government was passive, it seems that the blacklist published by the SEC, which already includes companies as important as the technology giant Baidu, has shaken things up. Thus, at the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information.
While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. In this regard, some companies are already listed on the Hong Kong stock exchange, as is the case of the three major technology companies (Alibaba Group, Tencent Holdings and Baidu).”
4. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Micron Technology, Inc. is a semiconductor company manufacturing and selling memory and storage products. The company has been involved in the AV sector for over 25 years, with its memory and storage portfolio enabling automotive applications and AVs.
A Buy rating was reiterated on Micron Technology, Inc. shares on August 10, by analyst Sidney Ho at Deutsche Bank. The analyst also placed a $68 price target on the stock.
This September, BofA added Micron Technology, Inc. to its list of new ideas in the Alpha Surprise Screen, which ranks stocks in the S&P 500 based on their attractiveness as investments. With a score of one being most attractive, Micron Technology, Inc. was assigned a score of 1.5.
Out of 895 hedge funds, 69 funds were long Micron Technology, Inc. in the second quarter, compared to 78 funds in the previous quarter. Their total stake values were $2.2 billion and $3.4 billion, respectively.
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. is a manufacturer of AVs and EVs, based in Austin, Texas. The company operates through its Automotive and Energy Generation and Storage segments.
Alexander Potter at Piper Sandler kept his Overweight rating on Tesla, Inc. shares on September 1. The analyst also raised his price target on the stock from $344 to $360.
By the end of this August, battery EV sales were up by 75% on a year-to-date basis. Tesla, Inc. was the global market leader in these sales, with over 616,000 units sold through July for a 16% market share.
Our hedge fund data shows 72 hedge funds holding stakes in Tesla, Inc. in the second quarter. Their total stake value was $7.2 billion.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor company providing graphics and computing and networking solutions. The company develops chips for personal vehicles and complete AV commercialization as well.
Needham’s Rajvindra Gill reiterated a Buy rating on NVIDIA Corporation shares on September 2. The analyst also placed a $170 price target on the stock.
The company’s revenue in the second quarter of 2023 was $6.7 billion, up 3% year over year and beating estimates by 3.47 million. Over the next three to five years, its EPS is expected to grow by 21.8%.
NVIDIA Corporation was found among the 13F holdings of 84 hedge funds in the second quarter, and 102 hedge funds in the previous quarter. Their total stake values were $3.3 billion and $6.4 billion, respectively.
1. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 153
Alphabet Inc. was among the first companies to buy into the AV sector. The company’s subsidiary Waymo works with EVs.
On August 3, Ivan Feinseth at Tigress Financial reiterated a Strong Buy rating on Alphabet Inc. shares. The analyst also raised the price target on the stock from $183 to $186.
This July, Alphabet Inc. shares jumped in light of the company’s second-quarter results with analysts such as Mark Mahaney at Evercore ISI commenting that the company’s fundamentals held up better than expected. Mahaney also noted that Alphabet Inc.’s (NASDAQ:GOOG) ad revenue grew by 5%.
A total of 153 hedge funds were long Alphabet Inc. in the second quarter, with a total stake value of $22.3 billion.
Investment management company Arch Capital mentioned Alphabet Inc. in its second quarter 2022 investor letter. Here’s what it said:
“In May we decided to buy Alphabet Inc. (NASDAQ:GOOG) (parent company of Google, YouTube, and Android). Our thesis was simple. Alphabet has billions of locked-in users around the globe with businesses like Search, Maps, and YouTube that should grow in-line or faster than worldwide GDP. With all the cash these businesses generate, management is able to reinvest in Google Cloud, Other Bets projects like Waymo, and return cash to shareholders via share repurchases. At an enterprise value-to-free cash flow (EV/FCF) of around 20 at the time of our purchase, we believe this sets up shareholders for low risk 15%+ returns over the next five years.”
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