Today, almost every car manufacturer has considerable resources to develop autonomous driving technology, which is the next major step in the automotive industry. The market for autonomous driving technology is clearly huge, with an estimated 100 million "interconnected" cars with autonomous driving capabilities to be shipped in 2021.
However, most automakers are trying to invent their own solutions, and they are forced to work with technology companies in the software and hardware arena to get self-driving cars on the road. So, in this article, I've listed the most promising forms of listed technology companies to get investors who want to profit from the development of autonomous driving technology.
Technical overview
First, let's briefly review the autopilot technology. The final solution for each car manufacturer is different, but there are still some common features.
In general, autopilots use three types of sensors: camera, ultrasound/radar, and lidar. Each sensor performs its own function and has different capabilities. Radars can detect moving objects around the vehicle, but they cannot detect roads and traffic lights, and their human detection is not very accurate.
Lidar has a similar function, but it can detect the human body more easily, but it is also more expensive than radar. The main sensor is a camera that detects all objects, including roads, traffic lights and pedestrians. However, the camera relies entirely on software to handle all inputs, so for autonomous vehicle systems it is difficult to use only the camera.
The system then needs to process and analyze all inputs from the sensor, making it possible using Deep Neural Networks (DNN). DNN is code, the basis of every autopilot, which helps identify and distinguish objects and make decisions. For example, DNNs are needed to identify boundaries on roads, the color of traffic lights, and the distinction between trucks and cars. Finally, the car computer's software system processes all the information and operates the steering wheel and pedals to safely drive the car to its destination.
To illustrate how neural networks accurately identify objects and make decisions, Tesla (Nasdaq: TSLA) provides a self-driving video, click here to watch.
Companies involved in autonomous driving construction
At present, many manufacturers have joined the development of large-automatic driving technology to promote the popularity of self-driving cars, among which the following are the most advanced:
Nvidia
NVIDIA is considered a pioneer in hardware related to autonomous driving technology. The company has proven its advantages in automotive infotainment systems (ie, in-vehicle computer systems), whose visual computing module uses Tegra chips to provide images for the interior of the car.
NVIDIA's current customers are: Audi (OTCPK: AUDVF), Porsche (OTCPK: POAHY), BMW (BMWYY), Tesla, Honda (NYSE: HMC), and mini. NVIDIA products are used in the digital cabs of “more than 10 million cars on the street todayâ€. In the first three quarters of 2016, the company's revenue in the automotive industry accounted for 7.6%, and I believe that NVIDIA will maintain these relationships to develop autonomous driving technology.
The latest autopilot hardware from NVIDIA is the Nvidia Drive PX 2, a car computer that uses artificial intelligence to support autonomous driving. The system is capable of exporting and using data from various sensors such as cameras, lidars, radars and ultrasonic sensors, locating vehicles in space and maps, planning safe paths and identifying all objects around the car.
NVIDIA describes the product as follows:
The DRIVE PX 2 provides real-time visibility into what is happening around the vehicle, pinning itself to a high-definition map and planning a safe path forward. It is the world's most advanced self-driving car platform – combining deep learning, sensor fusion and surround vision to change the driving experience.
In addition, NVIDIA's autopilot technology is supported by another company's invention, the Nvidia DGX-1 supercomputer. It can perform fast machine learning based on deep neural networks. This means that cars powered by the DRIVE PX autopilot can continue to develop their ability to detect possible collisions and understand the types of objects in their field of view, making autonomous driving safer and more precise.
NVIDIA has provided autopilot technology hardware for all new Tesla vehicles, running Tesla's visual neural network software. I expect that in the near future, most automakers interested in autonomous driving will use NVIDIA-made computers because it is the most powerful and complete solution available. Therefore, NVIDIA will inevitably benefit from future cooperation, and the company's development will be affected by the growing autonomous driving market.
Although NVIDIA should definitely be included in the autopilot company's portfolio, I think NVIDIA's current share price is too high to buy. Its P/E ratio is astronomical 55.0, and the price has increased by more than 400% compared to last year. In addition, preliminary data shows that NVI's net income increased by 2.7 times from 2016 to 2017, and it is difficult for the company to maintain this growth rate for a long time.
The support for NVIDIA stock is about $100 and $90. The range between the two, the price-earnings ratio of around 40 seems to be considered for purchase. However, given the market rebound we are currently seeing, prices may not fall to this level.
Delphi Auto and Mobileye
Another notable company is the Delphi car in the UK. The company offers vehicle components and is highly regarded for its safety technology solutions and electrical architecture. Autopilot technology is also based in part on this safety system, so Delphi may develop automated driving solutions based on its existing products.
It is worth noting that Delphi received 22% of net sales from two major automakers, GM and Volkswagen (as of September 2016), and the two auto companies will also offer self-driving cars in the near future. This shows that the existing relationship with the automotive industry enables Delphi to implement its autonomous driving solution and quickly commercialize autonomous driving products.
Delphi has a lot of results in the autopilot market. In 2015, Delphi partnered with Audi to demonstrate its autonomous driving technology in off-road travel in the United States. The Audi self-driving car with the Delphi solution installed autonomously driven 99% of the time, controlled by a computer, without any human interaction. In addition, in 2016, Delphi was selected by the Singapore government to implement the concept of self-driving cars in the country. Delphi is expected to offer a fleet of self-driving cars and develop cloud-based mobile software.
One of Delphi’s most important alliances in autonomous driving is Mobileye, an automotive product supplier from Israel. In 2016, the two companies revealed their partnership with the goal of introducing fully-automated vehicles in 2019, while other automakers are expected to complete in 2020-2021.
In turn, Mobileye is a supplier of vehicle positioning, mapping software, and machine learning solutions that are worthy of attention from investors in the autonomous driving arena. Although Mobileye lost an important customer, Tesla, at the end of 2016, Mobileye claimed that “13 automakers are working with Mobileye to promote autonomous driving.†In addition, 27 autopilot companies use the company’s roads. Security solutions.
Both Delphi and Mobileye should be included in the autopilot company's portfolio. I found that the financial status of both companies is very good. For example, from 2011 to 2015, Mobileye's revenue grew by an average of 80%, and I expect this growth to continue in the near future.
This is mainly because the average price of Mobileye's autopilot products (including cameras, driving strategy algorithms and maps) is expected to be between $400 and $500, which is "the price of $45 for Mobileye's current personal ADAS (safety) solution. 10 times higher." Mobileye's stock price rose by about 20% in 2017, and any fallback can be considered a buying opportunity.
About Delphi Automotive, the company's stock price-earnings ratio of 18.0, far below the industry average. In addition, although Delphi is undergoing restructuring, it maintained a steady net income in 2016 and announced that the increase in cash business exceeded Street's fourth quarter forecast. Delphi's share price has risen 13% in 2017 and is now close to the highest level in two years and has performed well. I think the current price level ($75-76, as of February 15), investors can consider buying.
NXP Semiconductors, Qualcomm and Cisco
NXP Semiconductors is a semiconductor company with a good product portfolio, including car audio and automotive vision products for security. NXP already has 14.4% of the automotive semiconductor market, and the company's chips have been adopted by many car manufacturers, including Tesla, Daimler, BMW and Audi.
I think NXP is a potential large company in the autopilot market. This is not only because the autonomous driving solution will require some of NXP's existing products (such as automotive safety systems, microcontrollers and sensors), but also because the company has the potential to develop new solutions based on existing technology. For example, NXP has introduced transaction security systems and in-vehicle networking products that can be easily converted into new solutions to enhance vehicle network security and establish a cloud-based communication system connection between cars on the road. .
As a result, NXP and Cisco took the first step toward implementing a vehicle-to-vehicle network by investing in Australia's Cohda Wireless. The company specializes in radio systems and software, enabling communication networks to be established between vehicles. This will enable the vehicle to share information such as current speed, direction, and "whether they are braking or accelerating."
Qualcomm has received much attention for its expertise in data communications, but its main value is the Qualcomm Strategic Operations Division (QSI), which invests in early companies in a variety of industries with different communication systems. In addition, the company proposed to acquire NXP Semiconductors, in which case Qualcomm will directly target the automotive market.
Regarding NXP's point of purchase, the company's share price is stable within 10% of the price offered by Qualcomm ($100/$110). This is because NXP's short-term costs are high, based on the fact that NXP is likely to present negative income in the near future. However, if NXP is eventually acquired by Qualcomm or suffers a counter-offer, the investor's return is inevitable.
Qualcomm and Cisco's P/E ratio (17.2/ 15.7) is significantly lower than the industry average (27.7/22.5). At the same time, the company has a stable operating margin and a very strong return on equity (ROE), higher than the industry average. Cisco's share price has risen by 10% in 2017, showing a very strong pace, I believe the current price level (about 32 US dollars) is a good time to buy stocks. Qualcomm's share price fell 13.36% in 2017, but it is now stable at around $55, which is a good opportunity to invest in it.
Intel and Microsoft
Both tech giants have demonstrated the fluidity of their ideas because they are involved in the development of many future technologies. For example, I have already described the work of these leading companies in the blockchain, and now I hope they work closely with car manufacturers to bring autonomous cars to life. As a result, Intel has announced a partnership with BMW at the 2017 CES show, claiming that they will begin testing autonomous driving technology on the road in the second half of 2017.
In turn, Microsoft took another approach, and Microsoft said it would try to integrate its existing products (such as Microsoft Cloud Azure, Windows and Office 365) into the vehicles of mature carmakers. Therefore, I believe that both Intel and Microsoft should be included in the portfolio of autonomous driving technology.
Regarding the timing of investing in Microsoft and Intel, I reiterate my evaluation in the previous article, I think the current price levels of these two stocks ($64 and $36, respectively) is a good time to buy. These points represent the price-to-earnings ratio of Microsoft 30 and the price-to-earnings ratio of Intel 17.
in conclusion
In summary, autonomous driving technology requires a number of separate products to combine to achieve a comprehensive solution. Obviously, many technology companies are trying to participate in the development of autonomous driving technologies (such as Google and Ford, etc.) and benefit from this market opportunity. However, for investors who want to profit from the growing autonomous driving arena, I think this article describes the four most promising options.
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