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 Microsoft Corporation (NASDAQ:MSFT) 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).
A development team working together to create the next version of Windows.
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.
Overall MSFT ranks 2nd on our list of the best self driving car stocks. While we acknowledge the potential of MSFT 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 MSFT 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.