Self-driving cars are hitting the roads, creating a big opportunity for autonomous driving stocks.
Mercedes-Benz (OTCMKTS:MBGYY) just became the first automaker to sell Level 3 autonomous cars in the U.S. And it doesn’t need a driver to watch the road.
Level 3 refers to different stages of driving automation. Levels 0, 1 and 2 refer to driver support features, which can steer, accelerate and brake. However, a driver must constantly supervise and take over when needed.
WithLevels 3, 4 and 5, a driver is not driving when automated driving features are on. That’s even if you are in the driver’s seat. With Level 3, though, when requested by the features, you have to take control of the car. With Levels 4 and 5, automated driving features will not require you to take over, as noted by SAE International.
One of the biggest reasons Tesla (NASDAQ:TSLA) isn’t at a Level 3 is because, according to The Verge, its self-driving cars have been linked to hundreds of crashes and deaths. As noted by CNBC, “Tesla’s Autopilot design has ‘led to foreseeable misuse and avoidable crashes,’ the National Highway Traffic Safety Administration (NHTSA) report said. The system did not “sufficiently ensure driver attention and appropriate use.”
Meanwhile, it was just reported that a self-driving Waymo taxi was seen driving down the wrong side of the road.
While Waymo and Tesla still have a lot of work to do, Mercedes-Benz seems to be off to a good start, which could help fuel upside potential for other autonomous driving stocks.
Nvidia (NVDA)
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The 800-pound gorilla of the tech sector is a big part of the autonomous driving boom.
According to Nvidia’s (NASDAQ:NVDA) CFO Collette Kress, “nearly every automotive company working on AI is working with Nvidia,” as quoted by QZ.com.
Nvidia is also working with hundreds of auto companies, including carmakers, truck makers and robotaxis. That includes Mercedes, Volvo (OTCMKTS:VLVLY) and Hyundai (OTCMKTS:HYMTF). Even Tesla was a big client in 2023, buying H100 GPUs.
Granted, NVDA is an $877 stock at the moment but it’s still a bargain. Some analysts say it could fly well above $1,000 near term. Loop Capital, for example, says NVDA could test $1,200, noting that company earnings will significantly beat estimates this year. The firm also has a buy rating on the stock. Even Oppenheimer analysts raised their price target to $850, citing growth from its data center revenue.
Every pullback in NVDA is a buying opportunity.
Ambarella (AMBA)
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We can also look at beaten-down, oversold shares of Ambarella (NASDAQ:AMBA), another one of the top autonomous driving stocks.
After dropping on earnings, the stock is now oversold and is attempting to pivot higher. It’s also over-extended on RSI, MACD, and Williams’ %R. Better, if you look at a two-year chart of AMBA, you’ll see that each time those three indicators align in oversold territory. And just as they’re doing now, the stock tends to bounce back. It’s happened about eight times since 2022.
With negativity now priced into AMBA stock, I’d like to see it retest $65 again near term. Helping, the company just announced a strategic deal focused on advanced mobility systems.
As noted in a recent press release, SANY Group “agreed to leverage Ambarella’s powerful CV3-AD family of automotive AI domain controller systems-on-chip (SoCs) to develop advanced automated driving solutions, and to achieve technical validation and deployment on its next-gen commercial vehicles and special-purpose vehicles.”
Kodiak Robotics also noted that its next-generation self-driving truck platform will use Ambarella’s CV3-AD685 SoC to “provide a high-performance compute solution in the smallest form factor, which enables Kodiak’s modular autonomous vehicle platform hardware across a wide variety of environmental conditions,” as noted in an AMBA press release.
Global X Autonomous & Electric Vehicles ETF (DRIV)
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Or, if you want greater exposure autonomous and electric vehicle (EV) stocks at less cost, look at the Global X Autonomous & Electric Vehicles ETF (NASDAQ:DRIV).
With an expense ratio of 0.68%, the ETF currently invests in 45 stocks involved in the development of autonomous vehicle technology, electric vehicles and EV components and materials. Some of its top holdings include Nvidia, Toyota Motor (NYSE:TM), Microsoft (NASDAQ:MSFT), Tesla, and Apple (NASDAQ:AAPL) to name a few.
At less than $24 a share, the DRIV ETF has been trending higher since bottoming out at around $23 a share. From its current price of $23.27, I’d like to see it retest $27.50 near term. What’s nice about the ETF is that I can buy 100 shares of it for about $2,327. Meanwhile, if I were to buy 100 shares of just one of its holdings, such as TSLA, it would cost me close to $16,830.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
