We recently compiled a list of the 10 Best Autonomous Driving Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where General Motors Company (NYSE:GM) stands against the other best autonomous driving stocks to buy.
The vision of fleets of driverless cars seamlessly transporting passengers has captivated consumers and driven billions in investment over recent years. Imagine summoning a driverless car with a tap on your phone, enjoying a stress-free, congestion-free commute. After years of anticipation and extensive development, self-driving car technology is finally becoming a reality. Vehicles equipped with advanced driver-assist systems (ADAS) and partial self-driving capabilities are now hitting the market, signaling the start of the race toward full autonomy.
Simultaneously, the robotaxi market is maturing, with commercial driverless services now active across the U.S. and China. Leading players in this space collectively operate over 2,000 robotaxis, gathering data to refine AI systems, ensuring safety, and serving mobility-as-a-service customers. According to IDTechEx, the autonomous vehicles market is poised for rapid growth, with projections indicating robotaxi vehicle sales could reach $174 billion by 2045, representing a compound annual growth rate (CAGR) of 37% starting in 2025.
According to a 2021 McKinsey survey, consumers are eager for autonomous driving (AD) features and willing to pay a premium. Ranked from Level 0-5 based on capabilities, growing demand for these systems could unlock billions in revenue. While vehicles equipped with Level 2 autonomy are widely known, the firm projects that widespread adoption of vehicles equipped with Level 4 capabilities will begin around 2026, with initial applications expected to focus on autonomous parking, with highway driving following shortly thereafter. Overall, McKinsey projects that the ADAS and AD market for passenger cars could generate $300 billion to $400 billion by 2035. The firm also highlights the far-reaching impact autonomous vehicles could have on various industries. For instance, by significantly reducing car accidents, advanced driver technology could lower the demand for roadside assistance and vehicle repairs, potentially challenging businesses in those sectors as adoption increases. Additionally, self-driving cars may eliminate the need for high insurance premiums, as liability for accidents could shift away from individual drivers. This could pave the way for new business-to-business insurance models tailored to autonomous travel.
Adding momentum, Bloomberg reports that President-elect Donald Trump’s transition team plans to prioritize a federal framework for self-driving vehicles within the Transportation Department. Currently, the National Highway Traffic Safety Administration (NHTSA) permits manufacturers to deploy 2,500 self-driving vehicles annually under exemptions. However, broader adoption of autonomous vehicles will likely require congressional action to establish comprehensive guidelines. Grayson Brulte, founder of The Road to Autonomy, a data and analysis firm specializing in self-driving technology, remarked:
“The companies want clarity on vehicles with no pedals and no steering wheel. There could be a fight over this, but if a federal framework is implemented, it could usher in the autonomy economy.”
Additionally, if new regulations permit the broader deployment of vehicles without human controls, it could significantly benefit Elon Musk. Musk, who has become an influential figure within the president-elect’s inner circle, has staked the EV maker’s future on self-driving technology and artificial intelligence. During his company’s recent quarterly earnings call, Musk expressed his intention to advocate for a streamlined federal approval process for autonomous vehicles, leveraging his position within the Trump administration to advance the regulatory framework for AV adoption.
TonyV3112 / Shutterstock.com
Our Methodology
In this article, we examined screeners and ETFs to identify leading companies actively engaged in the autonomous vehicle market. We ranked the top 10 stocks in ascending order based on hedge fund sentiment as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? 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).
General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 64
General Motors Company (NYSE:GM), a legacy automaker with iconic brands like Chevrolet, GMC, and Cadillac, has long been a cornerstone of the automotive industry. While these brands are not traditionally considered high-growth ventures, GM has embraced innovation through its 2016 acquisition of Cruise, a leader in self-driving technology. Cruise currently operates a limited fleet of driverless robotaxis and last-mile delivery vehicles in select cities. GM plans to integrate some of Cruise’s advanced technology into consumer vehicles within the next few years.
In its Q3 earnings report released on October 22, General Motors Company (NYSE:GM) exceeded Wall Street’s expectations, prompting the company to revise its 2024 guidance upward. The automaker reported adjusted earnings per share of $2.96, surpassing the consensus estimate of $2.43, alongside revenue of $48.76 billion, beating the anticipated $44.59 billion. GM now forecasts full-year adjusted EBIT between $14 billion and $15 billion, an increase from prior estimates of $13 billion to $15 billion. Additionally, its automotive free cash flow guidance was raised to $12.5 billion–$13.5 billion, up from $9.5 billion–$11.5 billion.
On December 4, BofA Securities reaffirmed its Buy rating for GM with a price target of $85. The firm highlighted GM’s robust annual revenue of $182.72 billion and an appealing P/E ratio of 5.78. BofA anticipates that the strength of GM’s core North American business will continue to support earnings and cash flow. Furthermore, GM’s investments in electric vehicles, hybrid and fuel cell powertrains, and advancements in autonomous vehicle technology are expected to drive long-term growth beyond 2024.
Diamond Hill Capital stated the following regarding General Motors Company (NYSE:GM) in its Q2 2024 investor letter:
“Other top Q2 contributors included Extra Space Storage and General Motors Company (NYSE:GM). Shares of automobile manufacturer General Motors (GM) rose as its internal combustion engine business has also received a boost from the recent slowdown in electric vehicle adoption among consumers. GM also announced additional share repurchases in Q2, reinforcing its commitment to returning cash to shareholders.”
Overall, GM ranks 5th on our list of best autonomous driving stocks to buy according to hedge funds. While we acknowledge the potential of GM, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
