Best Self-Driving Car Stocks for 2021
Investing in autonomous vehicle companies could be a great long-term bet.
Self-driving vehicles are at the top of most automakers and many technology companies’ to-do lists. Many companies view autonomous vehicles (AVs) as one of the biggest technological and transportation revolutions — perhaps because the scale of this market is so big.
And that’s why many investors have begun taking notice of self-driving car stocks. Both technology companies and automakers are making big advancements in AVs and bringing us closer to driverless vehicles than ever before.
LIDAR, artificial intelligence, cameras, and advanced processors all have to work in real-time to make these complex vehicles work properly, which is why we’re still a decade away from autonomous vehicle ubiquity.
Yet, with Tesla releasing “Beta” versions of its Full Self-Driving (FSD) software and Alphabet’s Waymo allowing driverless taxi rides today, this market is already clearly taking off. Between 2019 and 2026, Allied Market Research predicts autonomous sales will grow from $54 to $557 billion.
And those booming sales will be split up between chipmakers, LIDAR, software companies, and yes, even carmakers. Given the many ways to play the growth of self-driving cars we’ve put together 11 top self-driving stocks for investors who are wanting to get invested before this technology kicks into high gear.
11 Top Self-Driving Car Stocks for 2021
- General Motors (NYSE: GM)
- Tesla (Nasdaq: TSLA)
- Alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL)
- Ford (NYSE: F)
- NVIDIA (Nasdaq: NVDA)
- Baidu (Nasdaq: BIDU)
- Volkswagen (OTC: VWAGY)
- Intel (NYSE: INTC)
- Aptiv (NYSE: APTV)
- Magna (NYSE: MGA)
- NXP Semiconductor (Nasdaq: NXPI)
General Motors (NYSE: GM)
One automaker that’s betting big on self-driving cars is General Motors and its subsidiary, Cruise. Cruise has spent the past five years testing its technology in San Francisco and has logged more than 2 million test miles so far. The company ended 2020 by turning on some of its autonomous vehicle technology in the city sans drivers, proving that its technical know-how is accelerating.
Cruise recently announced that it’s partnered with Microsoft to leverage the tech company’s cloud computing power to help commercialize its autonomous vehicle solutions at scale. Microsoft is also investing $2 billion in cruise which, when combined with past investments from GM and Honda, value Cruise at $30 billion right now.
Cruise revealed its Origin self-driving vehicle in 2020, intended as a shared vehicle that passengers can use to get around town. Cruise is adamant that Origin isn’t a concept, but will be a production vehicle in the coming years. But that’s not the company’s only autonomous angle; Cruise is also partnering with Walmart to use part of its self-driving fleet to deliver groceries to customers this year.
When it comes to a self-driving car stock that is both leading the pack and bringing automotive prowess to the table, GM looks like a top self-driving car stock.
Tesla (Nasdaq: TSLA)
Tesla gave the world its first “sneak peek” into the self-driving future when it released its Autopilot software in 2015. Since then, self-driving technology has dramatically improved and Tesla is now testing out its Full Self-Driving (FSD) software in limited Beta trials.
Tesla’s inclusion of FSD on its cars provides a preview of the kinds of margin improvement self-driving could provide for automakers. Buying this feature adds $10,000 to the purchase price of a car, and Tesla CEO Elon Musk has indicated he expects the cost of FSD to raise over time.
Optimism for Tesla’s self-driving software has helped fuel the company’s rise. Tesla’s approach of favoring cameras (instead of LIDAR) and using its fleet of vehicles to help “train” its self-driving algorithms are quite controversial. However, it’s hard to argue that Tesla has been extremely innovative in the space. For example, in August 2019 the company unveiled an in-house chip they designed that was significantly more powerful than prior NVIDIA processors used in their cars.
Today, Tesla is priced at more than 25 times trailing sales, a multiple significantly higher than other automakers. However, as a company at the forefront of both self-driving and electric vehicles, it’s unlikely Tesla’s stock will be “cheap” for the foreseeable future. A bet on Tesla at today’s prices is a bet that Elon Musk will keep out-innovating the dozens of companies chasing down Tesla’s lead in electric cars.
Alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL)
Alphabet is best known as Google’s parent company but it’s also the undisputed leader in autonomous vehicles. Alphabet’s subsidiary Waymo has been developing autonomous vehicle technology for years and it’s one of the only companies that have a public self-driving robo-taxi service.
Waymo has logged more than 20 million test miles since the company started as a side project at Google and now the company has a fleet of vehicles on public roads in Phoenix, AZ, shuttling users around town to the grocery store and soccer practice.
What makes Alphabet unique among its fellow self-driving car stocks is that nearly no one can match the technological know-how Alphabet brings to the table, the length of time it’s been working on driverless cars (going on 10+ years), and its advanced mapping services through Google Maps.
Alphabet’s Waymo already has Level 5 autonomous vehicles (no need for a human driver) on the road and its latest funding round puts Waymo’s valuation at about $30 billion.
Ford (NYSE: F)
Technology companies get a lot of attention in the driverless car market right now, but major automakers are fierce competitors in this race too. Ford is already on the fourth-generation of its self-driving vehicle and owns a majority stake (which it splits with Volkswagen) in the autonomous vehicle company Argo AI.
As the best-selling car brand in the U.S., investors would be wise to keep a close eye on the moves Ford is making in this market. The company announced recently that it’s investing $22 billion in electric and autonomous vehicles through 2025 and it has plans to launch a commercial self-driving vehicle business in 2022.
Ford’s latest driverless car project will add 100 autonomous vehicles to the company’s current test fleet, which operates in at least six cities across the U.S.
These vehicles are more than just AV showmanship, Ford says that they have “launch-intent” technologies in them that the company plans to use in commercialized self-driving cars.
Automakers may not immediately conjure up thoughts of fast-moving technological innovators, but Ford proves that car companies won’t be kept out of the race towards autonomy.
NVIDIA (Nasdaq: NVDA)
NVIDIA makes it on this list because the company is a semiconductor powerhouse that will likely help power the most advanced self-driving car technology. NVIDIA’s graphics processing units (called GPUs) do a fantastic job at processing visual information and artificial intelligence — two things are at the core of self-driving.
NVIDIA has its own driverless car platform called DRIVE AGX and has also developed chips specifically designed for autonomous vehicle tasks.
The fact is that self-driving vehicles need to be smart, like really smart, and have to calculate trillions of operations per second. NVIDIA’s chips can do it, and its platform helps automakers bring the technology into their vehicles faster than ever before.
If all that wasn’t enough to make NVIDIA a great self-driving car technology stock, the fact that its GPUs are used for AI data centers means that when AVs utilize cloud computing for data processing, they’ll likely be tapping into NVIDIA chips to do so.
Baidu (Nasdaq: BIDU)
Baidu is a massive technology company based in Beijing that’s used its internet and artificial intelligence tech to become the leading self-driving car company in China.
Baidu’s self-driving car project, Apollo, already has a robo-taxi service in the country and claims to have the largest autonomous driving platform in the world. Apollo now operates 500 vehicles, which have provided rides to more than 100,000 passengers, and has logged more than 2 million miles of testing.
Beijing recently gave Baidu permission to operate five of its vehicles without the need for a safety driver to be in the vehicle. Baidu will instead have operators that can remotely control the vehicles if needed.
Baidu offers investors an opportunity to invest in self-driving car technology that’s being developed in China, which is the world’s largest automotive market.
Volkswagen (OTC: VWAGY)
As the largest automotive company in the world, Volkswagen understands that it has to be at the forefront of self-driving vehicle technology. That’s why the company has invested $2.6 billion in Argo AI, which gives it a majority stake in the company (which it splits with Ford).
That investment put Argo AI in charge of Volkswagen’s self-driving vehicle division and showed that the automaker was better off buying into existing tech than making its own. While Volkswagen and Ford are both tapping Argo AI for their autonomous tech, the two automakers are working with the self-driving company independently.
Volkswagen thinks that autonomous vehicles will be on the market between 2025 and 2030 and already has plans to launch self-driving shuttles in Qatar in 2022.
It’s hard to argue against Volkswagen’s size and its decision to invest in Argo AI when considering self-driving car stocks, just remember that the automaker is dependent on outside tech to win the autonomous race.
Intel (Nasdaq: INTC)
As a leader in the PC chip and server market, Intel has set its sights on self-driving cars as its next big chip opportunity.
The company made a huge move into this space back in 2017 when it paid a jaw-dropping $15 billion for an advanced driver assistance systems (ADAS) company called Mobileye. More than 25 automakers across the globe use Mobileye’s technology in 60 million vehicles.
Intel is playing the long-game with its Mobileye investment, but it’s still not clear whether or not the chipmaker will be able to significantly benefit from the self-driving car market.
Mobileye has certainly given the company a foot in the self-driving car market door, but the semiconductor industry is highly competitive. Even as the amount of autonomous vehicles increases there’s no guarantee that Intel’s silicon will be the go-to chips for this emerging tech.
Aptiv (NYSE: APTV)
Aptiv may not be a household name like Ford or GM, but it’s one of the largest automotive companies in the world, having generated nearly $14 billion in sales during 2019. The reason for this relative anonymity? Aptiv is a supplier to many of the world’s largest car companies.
That means Aptiv produces the “boring” infrastructure for cars such as their electrical distribution systems. However, unlike many car suppliers that focused on low-growth areas, Aptiv has dedicated considerable resources to self-driving and connected technologies.
Aptiv is a frequent headliner at technology events like CES, where it showcases self-driving technology. In addition, partnerships with Lyft and Hyundai have further deepened the company’s leadership in the self-driving space.
While Aptiv may not have the upside of many other names on this list, its early entries into self-driving technology could make the company a compelling “picks and shovels” play into the growth of self-driving and internet-connected cars.
Analysts believe the company could grow its sales to $23 billion by 2025. That’s a significantly lower projected growth rate than self-driving car companies like Tesla, or NVIDIA, but gives investors a nice balance of stability and growth opportunities that can form the foundation of a portfolio.
Magna (NYSE: MGA)
Magna is another auto supplier that could be a compelling portfolio addition to your portfolio. The Canadian company generated nearly $40 billion in sales during 2019. While the Covid pandemic dealt what’s likely a temporary blow to the auto industry last year, Wall Street projects Magna will recover most lost ground in 2021.
The bulk of Magna’s sales come from producing body exteriors, power management, and seating systems. However, the company has made a big push into the electric and self-driving spaces.
One compelling reason to keep an eye on Magna: it could soon become an Apple (Nasdaq: AAPL) supplier play. Magna will build cars for automakers on contract. As such, if Apple partnered with Magna on its self-driving electric vehicle that’s reportedly in development, the company could retain more creative control than it would have in a partnership with an established automaker.
NXP Semiconductor (Nasdaq: NXPI)
NXP is a diversified semiconductor company with some major clients that include Apple, Samsung, LG, and Continental. The company has significant expertise in low-power systems that should prove popular in electric self-driving cars.
Remember, while self-driving cars will need a powerful processor to be their “brain,” the reality is that they’ll include hundreds of specialized chips and sensors to handle a variety of tasks. That’s where NXP will specialize, selling solutions for things like blind-spot monitoring.
Throw in tailwinds from other trends such as IoT and NXP is a compelling investment.
Self-Driving Car Stocks vs. Auto Stocks
One question many investors have when looking for self-driving car companies is whether it’s better to zero in on technology upstarts like Tesla or Waymo, versus traditional automakers.
The reality is, there’s no right answer. For example, as you read above, many traditional automakers have invested in self-driving startups rather than build the technology in-house. In addition, there are no assurances that cutting-edge technology companies will be able to “solve” self-driving first.
For example, Uber sold its self-driving unit to the startup Aurora, as the development of the technology was proving too costly.
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Another important note is there’s no one “right” way to invest in self-driving. For example, while Amazon isn’t generally considered a self-driving company, it has made investments across the space. In addition, even if Amazon doesn’t directly build a car, advancements from the race for self-driving cars could give its logistics network a powerful edge, making it a “hidden winner” from the technology.
If you want to stay invested in the space without constantly scouring the stock market for new self-driving IPOs and news, another solution may simply be purchasing an ETF. A number of companies offer ETFs around self-driving technology that provide broad exposure to the space.
Self-Driving Supplier Stocks
One strategy for investing in self-driving cars is to pick suppliers rather than the “winning” car companies. In the article above we suggested Aptiv and Magna as large suppliers with tailwinds from self-driving cars and also NVIDIA and NXP as chip companies.
However, there is a large supply chain for self-driving cars that could benefit a number of “under the radar” winners. Here are couple more ideas if you’re looking for self-driving supplier stocks.
- Sunny Optical: The company makes optical components that have been booming from the growth of smartphones. With self-driving cars requiring sometimes dozens of cameras on a car, Sunny Optical could see major tailwinds from self-driving cars in the decade ahead.
- Taiwan Semiconductor: The company currently only generates 3% of its sales from the auto industry, but with self-driving cars requiring powerful cutting-edge computers, they should provide sizable growth to Taiwan Semi’s auto business in the years ahead.
What’s the Best Self-Driving Car Stock to Buy?
If I had to pick one top self-driving car stock right now that would balance limiting risk with potential upside, it would have to be General Motors. If you’re thinking that a century-old automotive stalwart can’t beat younger, agile, tech companies I understand your skepticism — but hear me out.
Let’s take Alphabet’s Waymo subsidiary for example. The company is one of the clear leaders in the automotive vehicle market right now and no one can touch Waymo’s 20+ million miles of testing and the fact that it launched one of the first-ever commercial autonomous vehicle services in the U.S.
But Alphabet is a $1.4 trillion company. While it owns 100% of Waymo, Alphabet’s massive market cap size limits how much the needle will move for the company’s stock no matter how much of the AV market Waymo takes.
In comparison, General Motors has a 69% stake in the self-driving startup Cruise, but GM’s market cap is $78.6 billion — far smaller than Alphabet. This means that if Cruise can grab even a sliver of the $1 trillion ride-hailing and robo-taxi market then it could end up significantly moving GM’s stock.
Additionally, I think it’s important to take notice here that GM is specifically working to disrupt itself in a market that’s in desperate need of disruption. Vehicles spend most of their time sitting in parking lots and garages while their owners are at work and home. All of this sitting around means people are spending tons of their hard-earned money each month on something they hardly use.
GM has realized that technology is already transforming how we use everything around us, and it’s on the cusp of upending transportation. The company is wisely positioning itself as a leader in this transition and it’s likely that its early bet is going to pay off.
GM could end up making money from Cruise as it launches an autonomous ridesharing service in the future or from licensing technology to other companies, or integrating the autonomous systems into future vehicles for commercial sale.
No matter which route GM takes, the company is already on the fast-track to an autonomous vehicle world, and this position — coupled with its size relative to the market — makes it a great self-driving car stock to buy. Just remember that autonomous vehicles are going to be slowly rolled out over the coming years and buying GM’s stock now isn’t going to bring big gains overnight.
But once self-driving vehicles become ubiquitous, and all signs point that tech companies and automakers are creating that future, GM’s is one of the best-positioned stocks to benefit.
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