We recently published a list of 10 Best Self-Driving Technology Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where QUALCOMM Incorporated (NASDAQ:QCOM) stands against other best self-driving technology stocks to buy according to hedge funds.
The autonomous driving industry is, along with machine learning and image processing, one of the earliest adopters of artificial intelligence. While the post-2022 hype surrounding AI has led to the technology catching the general public’s attention, what ChatGPT debuted was a subset of AI called generative artificial intelligence. Other forms of AI, such as machine learning, have been employed for far longer, and as we alluded to above, one form is autonomous driving.
Autonomous driving uses machine learning to compute data gathered through sensors or cameras on a car. The machine learning algorithms are trained using vast amounts of data already gathered. Several firms already have working autonomous driving platforms. These include Elon Musk’s car company, Google Waymo, and GM’s Cruise platform. Yet, even though all of them are autonomous driving platforms, they also represent a key division in the industry.
Before we get to the biggest controversy in the autonomous driving industry, it’s important to first get a sense of the industry’s value. According to research from Mordor Intelligence, as of 2024, the industry is worth a cool $41 billion. By 2029, the firm expects it to touch $144 billion by growing at a compounded annual growth rate (CAGR) of 22.75%. Analysts believe that one of the biggest drivers of the autonomy industry will be autonomous ridesharing. As per McKinsey, 56% of consumers surveyed in 2022 indicated that they would be willing to share self-driving vehicles provided that they did not increase travel time and cut down costs by 20%. The respondents also wanted Level 4 autonomy in their future cars, which indicates that the market for self-driving vehicles exists among consumers.
But what about businesses? After all, the corporate sector only invests in technologies if it’s confident about making a return and generating operating efficiencies. On this front, additional research from McKinsey shows that self-driving vehicle software could post margins of up to 15% while hardware could have margins of 10%. Autonomous vehicle services create margins of 14%, believes the research firm, as it adds that 96% of businesses surveyed “saw strategic partnerships as crucial to autonomous-vehicle development, and more than half (56 percent) thought the relationship between OEMs and end users (such as logistics carriers) is already changing.”
Cycling back to the division in the autonomous driving industry, this has divided the sector between using cameras to gather visual data or using LiDAR sensors instead. On the former front, Elon Musk created quite a bit of turmoil in 2019 when he announced that firms that use LiDAR for autonomous driving were unwise. Musk persisted with his opinion in a later interview given at an Axel Springer event. He explained that:
“We believe just cameras are the way to go. We don’t use LiDAR at all. The entire road network is designed for passive optical, it’s essentially vision. So, in order to make a car drive properly, you have to solve vision. And, at the point at which you solve vision, you really don’t need any other instruments. Like a careful driver, a human driver can drive with an extremely good track record. Unlike a human, the computer does not get tired. It has 360 degree surround cameras. It’s got three cameras pointing forward. So it’s like being able to see with the eyes in the back of the head. So it’s really, vision is the way to go. There’s some value to active optical for wavelength that’s occlusion penetrating. So it can see through fog, or rain, or dust. But it. has to be high resolution. Such that you can rely on, for example radar at roughly four millimeter wavelength. This is good for occlusion penetration. But it needs to have enough resolution to know you braking for a real object and not just a bridge, or a manhole cover, or something like that.”
However, while Musk is convinced that LiDAR isn’t worthwhile for autonomous driving, executives at Google’s Waymo business beg to differ. At a developer event in 2019, Waymo’s Principal Scientist Drago Anguelov commented “You can imagine doing driving just with cameras, but you would need the best camera systems to really handle it. So that’s a very big bet that you can achieve it. And it’s very, very risky, and it’s not necessary.” He added that his firm had better data courtesy of LiDAR which helps it “build the right simulation environments.” CTO Dmitri Dolgov shared that using LiDAR was “all about taking the best of both worlds and combining them in an intelligible way to have the most capable and the safest system that you can have.”
So, while Musk and the autonomous driving industry battle it out, we decided to look at which autonomous driving stocks hedge funds are piling into. The industry hasn’t performed too well in 2024 as a broader automotive and EV slowdown has meant that orders for self-driving equipment providers have slowed down. The slowdown has led to some stocks losing as much as 58% year-to-date, and as you read on, you’ll understand why.
Our Methodology
For our list of the best self-driving technology stocks, we ranked the holdings of Global X’s autonomy ETF with significant exposure to autonomous driving by the number of hedge funds that had bought the shares during Q3 2024 and picked out the top stocks. For an alternative list that focuses on the best autonomous driving car companies, please visit 10 Best Autonomous Driving Stocks to Buy.
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).
A technician testing the latest 5G device, demonstrating the company’s commitment to innovation.
QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Investors In Q3 2024: 74
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the largest semiconductor designers in the world. Its products are widely used in the smartphone industry, and the firm also has a presence in the automobile market through platforms such as CV2X. QUALCOMM Incorporated (NASDAQ:QCOM)’s expertise in semiconductor design and its broad product portfolio which ranges from CPUs and GPUs to neural processors has also enabled it to develop solutions for ADAS systems. The firm caters to this market through its Snapdragon Ride products which allow for navigation and obstacle detection among other features. However, QUALCOMM Incorporated (NASDAQ:QCOM) generates the majority of its revenue through smartphones which makes it vulnerable to the cyclical market. Advances in semiconductor fabrication and British chip design house Arm’s strategy of providing off-the-shelf solutions to businesses also create risks to QUALCOMM Incorporated (NASDAQ:QCOM)’s business.
Aristotle Capital Management mentioned QUALCOMM Incorporated (NASDAQ:QCOM) in its Q2 2024 investor letter. Here is what the fund said:
“Qualcomm, a leading wireless communications technology company, was the largest contributor for the quarter. After a period of weaker global demand for smartphones (driven by a slowdown in China) and elevated channel inventory, demand from Chinese handset manufacturers accelerated 40% year‐over‐year. More importantly, in our opinion, Qualcomm continues to execute on a previously identified catalyst of shifting its business mix beyond smartphones. The company announced increased progress for its automotive and Internet of Things (IoT) solutions. Within auto, the increase in vehicle content has resulted in 35% year‐over‐year revenue growth, with a design win pipeline of ~$45 billion, keeping the company on track to achieving ~$4 billion in auto‐related revenues by 2026. In recent years, despite persistent threats of insourcing from large clients (most notably Apple), Qualcomm has been able to retain its high market share in handsets while simultaneously expanding in non‐smartphone devices. We believe this progress is a testament to Qualcomm’s history of high (and productive) R&D spending, resulting in technological superiority. We believe Qualcomm’s technologies will continue to benefit as the world stays on a path toward a proliferation of connectivity between varying devices and as AI applications extend from the cloud to on‐device.”
Overall, QCOM ranks 4th on our list of best self-driving technology stocks to buy according to hedge funds. While we acknowledge the potential of QCOM 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 time frame. If you are looking for an AI stock that is more promising than QCOM 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.
