Driverless vehicles are no longer a moonshot, and it’s not just Tesla (TSLA) or Google’s (GOOG) Waymo that investors should have their eyes on.
“You need semiconductors, you need sensors, and then the final piece of the jigsaw is software,” Bank of America analyst Martyn Briggs told Yahoo Finance. “All of those components are enabling autonomous vehicles to become a commercial reality.”
The firm estimates the autonomous driving market at $1.2 trillion by 2040. Investors looking for value beyond the big names could consider companies in sensors and semiconductors. Bank of America’s top picks in sensors, which help autonomous vehicles “see,” include Aptiv (APTV), Denso (DNZY), Allegro (ALGM), Hesai (HSAI), RoboSense (XEDSF), and Nexteer (NTXVF).
Picks for semiconductors, which power an AV’s “brain,” go beyond AI juggernaut Nvidia (NVDA). Other top names include Qualcomm (QCOM), Infineon (IFNNF), NXP Semi (NXPI), and STMicro (STM).
Many of the companies boast big-league partnerships or industry-leading positions. Nexteer’s largest US client is General Motors (GM), while Hesai leads the global automotive LiDAR market with over 30% share, followed by RoboSense (24%).
Mercedes-Benz (MBG.DE) recently teamed up with Hesai to incorporate its LiDAR sensors into its intelligent driving vehicles, marking one of the first instances a non-Chinese carmaker has used Chinese tech. Other notable wins for Hesai include advanced driver assistance systems design contracts with Great Wall (GWLLY), Zeekr (ZK), and Geely (GELYF).
Nvidia, Qualcomm, and Infineon are at the forefront of AI and 5G, while Horizon Robotics (HRZRF) is growing rapidly in China. The company’s advanced driving and advanced driving assistance systems are used in 290 models across 42 brands, including all top 10 Chinese automakers.
Yet these names are valued at significantly lower forward price-to-earnings multiples compared to the top autonomous driving name, Tesla, which trades at a whopping 163x. Another potential robotaxi player, Uber (UBER), trades at 34x. On average, the aforementioned BofA sensor picks trade at 33x, while the semiconductor names trade at 34x.
A key debate in autonomous driving remains. Cars could solely rely on cameras and AI, like Tesla, or use a hybrid approach with LiDAR and radar, as seen with Waymo.
George Gianarikas, managing director of Canaccord Genuity, said multiple sensor technology has long-term potential. In contrast, Tesla founder Elon Musk has claimed fewer sensors and the use of smarter cameras can outperform the human eye while reducing system complexity. He’s gone as far as calling LiDAR technology “lame.”
