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Those looking for exciting growth stocks would do well to pay attention to what’s happening in London this year. By the end of 2026, driverless taxis will be on the roads, picking up passengers and taking fares.
The idea of computers driving cars safely would’ve been science fiction only a few years ago. It is now not only happening, but threatening to be rolled out worldwide and bringing in the kind of productivity increases only seen in once-in-a-generation inventions like the internet, the steam engine, or the printing press. And it might mean certain stocks end up being the best investments going…
Leading the pack
Leading the pack is Waymo, which will be running the trial in London this year. Waymo is a division of Google owner Alphabet (LSE: GOOG) and is already running driverless taxis in cities in America. It aims to be in 20 cities by the end of the year (along with London and Tokyo).
Early signs are promising. The taxis run well, are liked by consumers, and rarely encounter issues like getting stuck or causing accidents. The problem is that they operate under simple road systems that are well-mapped. Rolling the tech out on a larger scale, particularly in rural areas, might be more of a challenge.
The other company to get a foothold is Tesla (NASDAQ: TSLA) which is running a pilot program – albeit still using backup drivers in the car in case of failure. While the Tesla robotaxis seem to be behind in the race, they may have an ace up the sleeve – vertical integration.
The plan is for Full Self Driving – Tesla’s autonomous service which can be used by owners of the vehicles – to reach a point where they can ‘solve’ autonomous driving on all roads and in all conditions. If this ambitious goal is reached then it could be rolled out on a grand scale for taxis, personal cars, and even delivery and public transport vehicles.
Other options?
It will probably not escape notice that these options are huge companies with a lot more going on. Waymo is just 2% of Alphabet’s market cap according to one estimate. The self-driving part of Tesla is more integrated but still a single part of a $1.3trn company. This is a serious disadvantage for those looking for a pure driverless revolution play. Nonetheless, I think both are worth considering.
A third ‘wild card’ option is the Chinese company Baidu. The firm is apparently already running trials in Beijing. The country was much quicker to adopt electronic payments which might suggest it will be quicker to adopt autonomous vehicles too. However, I can’t say I’m interested in investing in Chinese companies, given potential government overreach.
There are other options like LiDAR (a movement detection system) firms, such as Ouster and Hesai Group, that provide part of the vital technology for the vehicles. Another possibility is Kodiak Robotics, a company that specialises in autonomous driving technology for larger vehicles like trucks.
Only time will tell if any of these go on to be once-in-a-generation opportunities. But, I think it’s worthwhile for investors to be aware of them all.
