Opinion: Beyond Tesla: seven stocks driving the autonomous car revolution
Published: July 30, two thousand seventeen 7:29 a.m. ET
Look at these component manufacturers rather than Tesla, Honda and other car companies
JeffReeves
To hear most car makers tell it, the driverless car revolution is already upon us.
From Tesla Inc. TSLA, -2.03% to Honda Motor Co. Ltd. HMC, -0.87% 7267, +0.23% to Daimler AG DDAIF, +0.73% DAI, +0.49% nameplate Mercedes-Benz, most automobile manufacturers are targeting two thousand twenty as the year that fully autonomous vehicles will be ready for prime time.
But what does that mean for investors?
It’s hard to see how driverless cars will switch the fundamentals of most auto makers in the next few years. Tesla clearly has its hopes tied up in the rapid growth of its electrified vehicles — as well as its energy solutions that include lithium batteries and solar energy, which seem much more significant to investors than any Autopilot upgrades. Legacy auto maker Honda booked about $33.Five billion in revenue last year, including sales of motorcycles and lawn mowers and other machines, so it’s difficult to believe that self-driving cars will become a material driver of this stock anytime soon.
On the other palm, companies that make components for these cars — namely, the high-tech semiconductors, sensors and software that make autonomous driving possible — could see their business boom.
A report by my colleague Therese Poletti last year called out chip makers as the thickest area of potential for investors. She quotes one expert’s prediction that the “world market for automotive semiconductors grew to $30.Three billion (in 2015), and is expected to hit about $41 billion in 2020.”
So which chip, software and component manufacturers are best placed to cash in as autonomous cars hit the open road with more onboard technology than ever before?
Here are seven to witness:
Autoliv
Founded in one thousand nine hundred ninety seven with a concentrate on vehicle safety, Autoliv Inc. ALV, -0.05% used to be known simply as the world’s leading airbag manufacturer. But the Swedish company has taken the tech revolution gravely and has branched out into crash sensors, brake controls and features that suggest night-driving assistance.
Clearly, there is only a petite step inbetween those technologies and a fully driverless car — and with an existing suite of technology that prevents crashes autonomously, one could argue Autoliv has put the most significant part very first.
With about $8 billion in its “passive safety” segment, the business is already closely connected with global auto sales in a big way.
Qualcomm
Qualcomm Inc. QCOM, -4.16% brings its own chipmaking might as a $80 billion semiconductor behemoth. But it isn’t just scale that this company offers, after spending $47 billion at the end of two thousand sixteen to acquire NXP Semiconductors NV NXPI, -0.50% which itself had acquired Freescale Semiconductor in 2015.
Freescale was a first-mover in the space, partnering with sports car icon McLaren in two thousand fourteen on a system for Formula One race cars to sense the pit wall, and NXP has shoved the technology forward with self-driving sensors and cameras in latest years.
Qualcomm has its fingers in many pies, of course, so autonomous technologies won’t be the only factor driving this tech megacap. But the segment could become increasingly significant in the future.
Intel
Not to be outdone, Qualcomm rival Intel Corp. INTC, -0.11% has also looked to grow its self-driving vehicle offerings via acquisition.
The planned $15 billion purchase of camera and sensor company Mobileye NV US:MBLY may not stir the needle for the chip giant in the near term, since this will add only about $500 million to Intel’s toughly $60 billion total revenue this year. However, you can be sure that Intel is more interested in the next generation of the firm’s EyeQ chips and sensors as autonomous cars come into their own over the next few years.
STMicroelectronics
While many big chip makers like Intel are still caught up in the transition from laptops to smartphones, STMicroelectronics NV STM, +0.80% STM, +0.67% has been content providing chips for less charming corners of the market such as flat-screen TVs and desktop printers.
It also has been glad to provide millions of chips to auto makers over the past few years for everything from Bluetooth connectivity to GPS systems, well before autonomous cars became such a hot topic. In fact, the Automotive group totaled 40% of STM revenue last year.
This arm of STM is also growing prompt in the near term thanks to electrical vehicle chipsets used for charging and power management, and those existing relationships with auto manufacturers will serve it well with manufacturers in a driverless age.
Delphi Automotive
Delphi Automotive PLC DLPH, -1.00% spun off from General Motors Co. GM, -0.51% in 2011, is one of the largest auto component companies on the planet. That means Delphi is uniquely qualified to see the chance of brainy, connected vehicles — and to capitalize on that chance.
The company this year is launching a “multi-domain controller” that reduces the complexity of onboard computer functions and is designed to be efficient and scalable with tomorrow’s technology — including radar and camera technology. That shouldn’t be a surprise, since the company has been making collision warning systems since as early as one thousand nine hundred ninety three and radar-enabled “smart” cruise control since 1999.
As with STMicroelectronics, the power of existing manufacturing relationships are a fat plus.
Nvidia
You knew we’d get to this hot stock eventually, since hype about driverless cars, artificial intelligence and similar forward-looking tech trends are the thickest reason that Nvidia Corp. NVDA, -3.59% has surged more than 700% in two years.
But don’t think the driverless car angle has come out of left field; NVDA has provided its Tegra processors to many major auto makers for “infotainment” purposes for some time — from captivating brands like the Tesla Model X to populist vehicles like model year two thousand fifteen Honda Civics and CR-Vs.
As the hub in connected cars of today, it’s a natural progression for Nvidia to be a part of the jumpy system in self-driving cars of tomorrow.
BlackBerry
Tho’ many still think of BlackBerry Ltd. BBRY, -2.89% as the fallen first-mover of mobile technology, the company’s reinvention over the past few years has been fairly ambitious. That includes an effort to stage a comeback by focusing on software, from better-known efforts at secure messaging to under-the-radar attempts to ramp up its car software in time for the self-driving car market. Its QNX operating system has long been part of Ford Motor Co. F, -0.23% vehicles via the Sync three connectivity and infotainment platform, and it’s also a part of GM’s OnStar technology.
One report pegs BlackBerry’s current software market at more than sixty million vehicles worldwide. Making a secure platform for the self-driving AI of the future isn’t as captivating as building electrical vehicles with your brand on the grille, but with so many leaving behind about this stock, maybe this is the sleeper bid BlackBerry needs to climb on a serious comeback in the next few years.