Tesla (TSLA +0.91%) is one of the leading players in the electric vehicle (EV) market, and it's making big bets on artificial intelligence (AI) technologies. The company has already introduced some autonomous driving services, and it's aiming to make improvements that could open up powerful new growth opportunities. If the company can perfect its AI-powered autonomous driving technologies, it will have the chance to launch massive new businesses including robotaxis and self-driving trucks for commercial goods transport.
But Tesla isn't the only top automaker that's making big bets in the self-driving space, and some reports suggest another leading EV company is actually ahead in the category. If you're looking for EV stocks that have the potential to benefit from the AI revolution, read on to see why this company could be a worthwhile investment.
This auto giant is gearing up for a self-driving future
General Motors' (GM 0.40%) Super Cruise advanced driver assistance system has been serving up encouraging results and outperforming Tesla's full self-driving system according to some trials. According to a test of GM, Tesla, and Ford Motor Company's respective autonomous-driving systems conducted by CNBC's Michael Wayland late last year, GM's Super Cruise was the best-performing and most consistent of the three.
Super Cruise has broadly received very strong marks for its highway driving capabilities, and the automaker says that it will have the Super Cruise tech available in 22 vehicles by the end of this year, including the Bolt EUV, Blazer EV, Equinox EV, and the Silverado EV. GM is also gearing up to launch the next evolution of the tech.
NYSE: GM
Key Data Points
The company's Ultra Cruise feature will debut with next year's Cadillac Celestiq model and is said to be able to handle 95% of all roads and driving situations. With updates, the auto giant expects that Ultra Cruise will eventually be able to handle every paved road. Ultra Cruise is built around a sensor setup that's significantly more comprehensive than what's offered by current Tesla models and what's expected with the EV leader's next-generation updates.
In addition to its driver-assistance systems, GM also owns Cruise, a stand-alone business devoted to developing autonomous vehicle technologies. Cruise is focused on robotaxis and is already providing service in San Francisco, Austin, and Phoenix, and it expects to reach over $1 billion in annual revenue in 2025. Strikingly, the robotaxi unit believes that it will be do $50 billion in annual sales in 2030. Whether or not it manages to reach that ambitious target, Cruise has the potential to be a significant performance driver for GM.
Is GM the better AI-driven EV stock?
While Tesla trades at a whopping 55 times this year's expected earnings, GM is valued at just 5 times this year's expected profits. Of course, that's not to say that the current EV leader doesn't deserve a significant valuation premium.
GM PE Ratio (Forward) data by YCharts
Over the trailing 12 months, GM has recorded revenue of roughly $161 billion. Meanwhile, Tesla has posted sales of $86 billion across the stretch. Yet despite the gulf in sales, the companies are much closer when it comes to actual profits generated across the stretch. GM has generated roughly $11.8 billion in net income over the trailing-12-month period, while Tesla generated approximately $9.4 billion in profits in the period.
Even with headwinds tamping down on demand for its vehicles and the company implementing price cuts, Tesla is managing to deliver sales growth and margins that are the envy of the broader market. Posting superior margins and torrid revenue increases also means that the company is growing its earnings at a much faster rate compared other large automakers, but the market may be underestimating General Motors.
While Tesla is still the clear leader in EVs, GM is now second in terms of unit sales in the U.S. market. It's unlikely that GM will ever be able to match Tesla when it comes to margins on vehicle sales, but AI-driven advances in self-driving tech could help GM gain market share, tap into the potentially massive robotaxi opportunity, and become significantly more profitable.
As of this writing, Tesla is valued at about $612 billion, while GM has a market cap of approximately $46 billion. Those seeking broad exposure to the EV market may want to own both stocks, but I actually think General Motors offers a better risk-reward proposition at today's prices.
