Very quietly, self-driving vehicles are on the verge of becoming mainstream. In China, robotaxis that their makers are nearly breaking even financially and will probably become profitable in 2025. In the U.S., Amazon’s (NASDAQ:AMZN) robotaxis are being tested in three cities: San Francisco, Las Vegas, and Seattle, while two more, Miami and Austin, to the list.
Moreover, after conducting many years of testing in Texas, could soon be carrying goods between Dallas and Houston. And I have little doubt that the self-driving vehicle business and autonomous driving stocks will eventually be very lucrative. That’s because, given widespread shortages of drivers and the large amounts of money that they must be paid, companies will be willing to hand over a great deal for automated vehicles.
While Tesla (NASDAQ:TSLA) has made major strides in the autonomous-driving race, it already has a very large valuation, along with major regulatory issues in the U.S., and is suffering market share losses in both America and China. Therefore, I view these autonomous driving stocks as better bets than Tesla.
Aurora Innovation (AUR)
Increasing my confidence in Aurora Innovation (NASDAQ:AUR), two major entities in recent quarters significantly increased their investments in the firm.
Hedge fund Dimensional Advisors ownership of AUR stock by 42% to 7.57 million in Q4 2023. As of the end of last year, the fund, which offers many ETFs, had a huge management. And last July, Uber Technologies (NYSE:UBER) bought $75 Aurora’s shares. Uber purchased the stock for $2.70-$3, versus Aurora’s current price of around $2.30.
By the end of the year, Aurora expects its autonomous trucks to be hauling freight in Texas for several huge companies, including FedEx (NYSE:FDX), Uber Freight, and Werner. The company expects to expand rapidly in the coming years, with “thousands” of trucks in only three years. The firm intends to eventually sell trucks equipped with its software and hardware to other firms.
Given the company’s impressive customer list and ambitious plans, along with the substantial purchases of AUR stock, I view the name as one of the best autonomous driving stocks to buy.
Baidu (BIDU)
China-based Baidu (NASDAQ:BIDU) is the first company that I’ve seen to self-driving vehicles are on the verge of becoming profitable. The company’s recent announcement that its Apollo Go robotaxi business is close to breaking even and will probably break into the black next year is quite momentous and bodes very well for BIDU stock. According to IOT World Today, if Baidu achieves the milestone, it will become “the world’s first profitable autonomous ride-hailing platform.”
And illustrating Baidu’s huge commitment to Apollo Go, the firm reportedly intends to deploy 1,000 of its new robotaxis in just one city – Wuhan. Further, indicating that the robotaxi business will indeed be very lucrative for Baidu, the new vehicles cost less than $28,000.
Also importantly, analysts, on average, expect Baidu’s earnings $12.10 next year from $11.40 in 2024. Despite the expected, substantial increase in its profitability and the huge, longer-term potential of its robotaxi business, BIDU stock is a very low price-earnings ratio of 9.65 times.
Rivian (RIVN)
Rivian (NASDAQ:RIVN) reports that all of its EVs come equipped with software called Driver+. According to the company, Driver+ -free driving with a suite of active safety and driving assistance features — capable of automatically steering and adjusting the speed on your command.”
Moreover, two recent developments indicate that the automaker stands well-positioned to vastly improve its self-driving features over the longer term.
First, the new version of the “a new in-house developed autonomy system,” Seeking Alpha reported. Reportedly significantly more advanced than the previous version, the new offering now includes “11 cameras, five radars, and AI prediction technology.”
And speaking of AI, in a recent note to investors, well-known Morgan Stanley analyst Adam Jonas wrote that “ ‘uniquely positioned within autos (other than Tesla) on scaling a fully integrated software stack critical to unlocking the AI opportunity.'” Given Jonas’ assertion, I expect Rivian to greatly improve its self-driving technology over the long term.
On the date of publication, Larry Ramer held long positions in AUR, RIVN, and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
