We recently compiled a list of the 10 Best Self Driving Car Stocks To Buy Now. In this article, we are going to take a look at where Amazon.com, Inc. (NASDAQ:AMZN) stands against the other self driving car stocks.
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.
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).
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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.
Overall AMZN ranks 1st on our list of the best self driving car stocks. While we acknowledge the potential of AMZN as an investment, 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.