Self-driving cars will change the world in countless ways. They hold the promise of riders being able to engage in other activities while in a vehicle, collisions and traffic deaths being significantly reduced, and the daily cost of travel dropping by as much as 80%.
According to analysts at Swiss bank UBS, the market for autonomous rideshare vehicles (or robotaxis) will reach at least $2 trillion by 2030. What's more, Intel (INTC -0.38%) believes the market could reach $7 trillion by 2050. For investors looking to cash in on the autonomous vehicle trend, NVIDIA (NVDA 3.65%) and Alphabet's (GOOG 1.25%) (GOOGL 1.27%) Waymo look like long-term winners.
1. NVIDIA: The leading platform
According to a report by Navigant Research, NVIDIA and Intel's Mobileye are the two front-runners in the market for automated-vehicle computing platforms, though the report calls NVIDIA "the clear leader" in the space. These companies are building the artificial-intelligence (AI) systems that will power self-driving cars.
A Zoox robotaxi. Image source: Zoox.
NVIDIA's DRIVE platform consists of hardware and software designed to support driverless vehicles, from level 2 (partly automated) all the way up to level 5 (fully automated). For instance, NVIDIA DRIVE software enables developers to build and deploy the necessary AI applications. And its DRIVE AGX Pegasus hardware -- which combines two systems-on-a-chip with two of NVIDIA's latest Ampere graphics processing units (GPUs) -- provides the computing horsepower needed to rapidly process data from lidar, radar, and cameras and run the deep neural networks that allow the car to move autonomously.
When it comes to AI, NVIDIA's best-in-class GPUs significantly outperform Intel's chips. And NVIDIA's industry-leading solution has helped the company attract dozens of partners, from start-ups to established enterprises. These include automakers Toyota, Audi, Volvo, and Daimler's Mercedes-Benz; mobility service providers like Airbus, Aurora Mobile, and Zoox (owned by Amazon); as well as researchers at prestigious institutions like University of California-Berkeley, Carnegie Mellon, and MIT.
NVIDIA is also unique in this market, since the company not only supplies the in-car computing platforms, but also the data-center infrastructure and simulation platform needed to train and validate the deep neural networks before deploying them in cars for real-world use.
For example, NVIDIA's DGX supercomputers are used in data centers across the globe to train AI algorithms, and the chipmaker's products are considered an industry standard. Put simply, NVIDIA's hardware is better, and its end-to-end process -- from the data center to the car -- creates a seamless experience for clients, giving the company a big advantage. That should keep NVIDIA ahead of its rivals.
2. Waymo: The leading robotaxi service
The report by Navigant Research also ranks the companies developing level 4 autonomous vehicles -- in other words, companies building robotaxis. In this category, Alphabet's Waymo comes out on top. And while General Motors' (GM 4.37%) Cruise and Ford (F 0.47%) are also considered leaders, Waymo has a few advantages over these rivals.
A Waymo robotaxi. Image source: Waymo.
First, as of April 2020, Waymo had completed 15 billion simulated-driving miles and 20 million autonomous real-world driving miles. By comparison, GM's Cruise announced in December 2020 that it had completed only 2 million real-world miles. In other words, Waymo has way mo' data, and data is a huge advantage when it comes to artificial intelligence.
Moreover, with the launch of Waymo One in 2018, it became the first company to offer an autonomous ridesharing service to select individuals. Today, that service is open to the general public in the Phoenix metropolitan area. And while GM's Cruise had plans to launch a similar service in San Francisco in 2019, that vision never became a reality, and the company has yet to reschedule.
Likewise, Ford had plans to launch a self-driving service in 2021, but has already delayed its launch until 2022. Waymo has consistently been a few steps ahead, and that doesn't appear to be changing.
Its position as a first-mover should be a powerful long-term advantage. And Alphabet generated more free cash flow in the last 12 months than Ford and GM combined, which means it can invest more aggressively in its technology. As a result, Waymo is expected to own 60% of the $2 trillion robotaxi market by 2030, according to UBS.
A final word
Autonomous vehicles are not particularly profitable for Alphabet or NVIDIA at this point. Over the trailing 12 months, NVIDIA generated $554 million in automotive revenue. Likewise, Alphabet's Other Bets business (which includes Waymo) generated $657 million in revenue -- less than 1% of the company's top line.
But that should change as more self-driving cars hit the streets in the coming years, and the market should expand rapidly. That's why both NVIDIA and Alphabet's Waymo are well positioned to be long-term winners.
