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Though makers of generative AI technologies like chatbots and related hardware plays, including Nvidia (NVDA), have been some of the biggest and earliest winners of this artificial intelligence (AI) boom, investors must not forget about the innovative tech darlings that are playing the long-term game.
Many companies are investing heavily in R&D to capitalize on the AI-led industrial revolution. And though it could take years for expenditures to turn into earnings, extremely long-term investors should be willing to explore the broader basket of AI plays in search of the next winner.
Now, it may be way too early in the AI revolution to tell which individual company stands to benefit the most from a potential robotaxi race. Regardless, there could be numerous winners, as more self-driving cars start navigating our roads in growing numbers over the next few decades.
With this in mind, let's look at two stocks that could have the most to gain from a robotaxi race: Tesla (TSLA) and Uber (UBER).
Tesla
Tesla's legendary CEO Elon Musk is serious about robotaxis and AI-powered self-driving technologies. Just this May, Musk shined a light on what he expects the robotaxi market will be like. He sees Tesla's version of the robotaxi as offering a revenue-split model similar the likes of an Uber or Airbnb (ABNB).
However, this isn't the first time Musk has made bold statements regarding robotaxis. During a Q1 2022 earnings call, Musk noted Tesla's plans to bring a robotaxi to market by 2024. Here we are, less than a year away, and there aren't any robotaxis in sight yet.
Whether a Tesla robotaxi launches between now and year's end remains to be seen. Regardless, I do think Tesla may need to extend the timeline on its ambitious robotaxi plans, given all the complexities and regulatory hurdles involved in kicking off such a novel service that threatens to disrupt the market of ride-hailing as we know it. And despite recent advancements in AI, it still seems like fully autonomous ride-hailing will always be a tad out of reach.
That being said, autonomous-driving capabilities have undoubtedly been in the works for quite some time over at Tesla. And though Elon Musk is somewhat notorious for being incredibly ambitious, I do not doubt the company can take most of the robotaxi market once it gets the green light. Tesla certainly has the tech talent and dataset to make autonomous robotaxis a reality.
Plus, Tesla is arguably ARK Invest's Cathie Wood's favorite innovation stock. She's factored the robotaxi growth potential into her models, and if her assumptions are correct, Tesla stock may just be able to hit Ark Invest's long-term price target of $2,000 by 2027.
It's easy to dismiss such an outlandish price target based on a market with an unknown timeline. Regardless, Cathie Wood does provide a lot of food for thought.
Uber
Uber has a lot to lose if it can't keep up in the robotaxi race. In fact, the company may end up disrupting itself as it looks to replace its drivers with technology.
Currently, Uber has a profoundly wide moat around its corner of the ride-hailing market. With an impressive network and the algorithms to meet supply and demand on the fly, it will be hard to catch up to the likes of Uber without some sort of game-changing innovation - like full autonomy.
As with Tesla, Uber has a treasure trove of data it can use to feed its AI algorithms. If Uber can retain the edge in the self-driving race, not only can the company defend its turf in ride-hailing, it could also experience a profound profitability surge. Indeed, cutting drivers out of the equation can result in quite an unprecedented margin boost.
In the meantime, Uber is well-positioned to continue moving further into GAAP profitability. Just this week, the company clocked in its first-ever quarterly operating profit. It's a significant milestone, but the company's not at the finish line quite yet. Uber still looks to be flooring it to maintain growth while trimming away at costs.
Conclusion
Tesla and Uber are the early top dogs when it comes to the robotaxi race. At this juncture, it's hard to tell which firm has the edge. Fortunately, I don't think it will matter if both firms can deliver when the time comes. The robotaxi market is sizeable enough to mint two, if not more, winners.
As it stands, Uber may have more at stake in the robotaxi race, given it will be playing defense as autonomous driving disrupts the ride-hailing scene. However, the question is whether or not Tesla will be the firm to disrupt ride-hailing as we know it.
On the date of publication, Joey Frenette did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
