We recently published a list of 10 Best Self-Driving Technology Stocks To Buy According to Hedge Funds. In this article, we are going to take a look at where Intel Corporation (NASDAQ:INTC) stands against other best self-driving technology stocks to buy according to hedge funds.
The autonomous driving industry is, along with machine learning and image processing, one of the earliest adopters of artificial intelligence. While the post-2022 hype surrounding AI has led to the technology catching the general public’s attention, what ChatGPT debuted was a subset of AI called generative artificial intelligence. Other forms of AI, such as machine learning, have been employed for far longer, and as we alluded to above, one form is autonomous driving.
Autonomous driving uses machine learning to compute data gathered through sensors or cameras on a car. The machine learning algorithms are trained using vast amounts of data already gathered. Several firms already have working autonomous driving platforms. These include Elon Musk’s car company, Google Waymo, and GM’s Cruise platform. Yet, even though all of them are autonomous driving platforms, they also represent a key division in the industry.
Before we get to the biggest controversy in the autonomous driving industry, it’s important to first get a sense of the industry’s value. According to research from Mordor Intelligence, as of 2024, the industry is worth a cool $41 billion. By 2029, the firm expects it to touch $144 billion by growing at a compounded annual growth rate (CAGR) of 22.75%. Analysts believe that one of the biggest drivers of the autonomy industry will be autonomous ridesharing. As per McKinsey, 56% of consumers surveyed in 2022 indicated that they would be willing to share self-driving vehicles provided that they did not increase travel time and cut down costs by 20%. The respondents also wanted Level 4 autonomy in their future cars, which indicates that the market for self-driving vehicles exists among consumers.
But what about businesses? After all, the corporate sector only invests in technologies if it’s confident about making a return and generating operating efficiencies. On this front, additional research from McKinsey shows that self-driving vehicle software could post margins of up to 15% while hardware could have margins of 10%. Autonomous vehicle services create margins of 14%, believes the research firm, as it adds that 96% of businesses surveyed “saw strategic partnerships as crucial to autonomous-vehicle development, and more than half (56 percent) thought the relationship between OEMs and end users (such as logistics carriers) is already changing.”
Cycling back to the division in the autonomous driving industry, this has divided the sector between using cameras to gather visual data or using LiDAR sensors instead. On the former front, Elon Musk created quite a bit of turmoil in 2019 when he announced that firms that use LiDAR for autonomous driving were unwise. Musk persisted with his opinion in a later interview given at an Axel Springer event. He explained that:
“We believe just cameras are the way to go. We don’t use LiDAR at all. The entire road network is designed for passive optical, it’s essentially vision. So, in order to make a car drive properly, you have to solve vision. And, at the point at which you solve vision, you really don’t need any other instruments. Like a careful driver, a human driver can drive with an extremely good track record. Unlike a human, the computer does not get tired. It has 360 degree surround cameras. It’s got three cameras pointing forward. So it’s like being able to see with the eyes in the back of the head. So it’s really, vision is the way to go. There’s some value to active optical for wavelength that’s occlusion penetrating. So it can see through fog, or rain, or dust. But it. has to be high resolution. Such that you can rely on, for example radar at roughly four millimeter wavelength. This is good for occlusion penetration. But it needs to have enough resolution to know you braking for a real object and not just a bridge, or a manhole cover, or something like that.”
However, while Musk is convinced that LiDAR isn’t worthwhile for autonomous driving, executives at Google’s Waymo business beg to differ. At a developer event in 2019, Waymo’s Principal Scientist Drago Anguelov commented “You can imagine doing driving just with cameras, but you would need the best camera systems to really handle it. So that’s a very big bet that you can achieve it. And it’s very, very risky, and it’s not necessary.” He added that his firm had better data courtesy of LiDAR which helps it “build the right simulation environments.” CTO Dmitri Dolgov shared that using LiDAR was “all about taking the best of both worlds and combining them in an intelligible way to have the most capable and the safest system that you can have.”
So, while Musk and the autonomous driving industry battle it out, we decided to look at which autonomous driving stocks hedge funds are piling into. The industry hasn’t performed too well in 2024 as a broader automotive and EV slowdown has meant that orders for self-driving equipment providers have slowed down. The slowdown has led to some stocks losing as much as 58% year-to-date, and as you read on, you’ll understand why.
Our Methodology
For our list of the best self-driving technology stocks, we ranked the holdings of Global X’s autonomy ETF with significant exposure to autonomous driving by the number of hedge funds that had bought the shares during Q3 2024 and picked out the top stocks. For an alternative list that focuses on the best autonomous driving car companies, please visit 10 Best Autonomous Driving Stocks to Buy.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A technician soldering components for a semiconductor board.
Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Investors In Q3 2024: 68
Intel Corporation (NASDAQ:INTC) is one of the few integrated semiconductor manufacturers in the world which allows it to design and manufacture chips. It operates in the autonomous driving market through its processors and its Mobileye subsidiary. Intel Corporation (NASDAQ:INTC)’s Gaudi processors can be used to train autonomous driving models, which makes the firm one of the few in the world that can design and make chips for these applications. Additionally, Intel Corporation (NASDAQ:INTC) subsidiary Mobileye is a key player in the ADAS systems market. These systems are indispensable for autonomous driving cars, and Mobileye provides businesses with a one-stop shop to buy and use them in their products. However, 2024 has been full of turbulence for Intel Corporation (NASDAQ:INTC) and Mobileye. While the former has struggled with a slowing PC market and its turnaround efforts, the latter has had to stop internal LiDAR development and lay off employees as it battles a slow automobile market.
ClearBridge Investments mentioned Intel Corporation (NASDAQ:INTC) in its Q3 2024 investor letter. Here is what the fund said:
“While the market environment clearly was a headwind in the third quarter, several of our large positions also faced challenging conditions, which negatively impacted results. In the information technology (IT) sector, Intel Corporation (NASDAQ:INTC) has come under additional pressure due to continued softness in the company’s core PC and server markets as well as concerns on the company’s longer-term competitive position. While Intel’s turnaround is not happening overnight, we are constructive on the outlook into 2025: the company’s product positioning should be much improved and it should be positioned to gain market share in a cyclical upswing in which it has strong earnings power. A somewhat adverse spending environment due to AI myopia has weighed on shares, but we still think the market is undershipping PCs and general servers following a COVID normalization period that saw demand get pulled ahead and then languish as companies froze IT budgets. The installed base is now getting older, and we expect a strong refresh cycle into next year. The delay is actually beneficial to Intel, whose product positioning will be all the more improved. While our investment case is not predicated on an M&A transaction, and we believe one is unlikely, the expression of interest in the company speaks to the value of the assets, which we think still trade at a meaningful discount to fair value.”
Overall, INTC ranks 5th on our list of best self-driving technology stocks to buy according to hedge funds. While we acknowledge the potential of INTC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than INTC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.