Is General Motors Company (GM) one of the best stocks in the autonomous car industry, according to hedge funds?

We recently made a list The 10 Best Self-Driving Car Stocks to Buy Now. In this article, we’ll take a look at how General Motors Company (NYSE:GM) stacks up against other self-driving car stocks.

Advances in artificial intelligence, data analytics, and machine learning are shaping the way industries operate today. These three technological advances have increased the potential of autonomous vehicles and advanced driver assistance systems (ADAS).

But are consumers ready to put their hands off the wheel and trust autonomous vehicles? Let’s take a look at how the autonomous driving industry is evolving, with almost all major automakers investing significantly to get their Full Self Driving (FSD) cars on the road.

Global Autonomous Vehicle Industry

According to a report by Mordor Intelligence, the global autonomous vehicle market is valued at USD 41.10 billion in 2024. The market is expected to grow at a compound annual growth rate of 22.75% to reach USD 114.54 billion by 2029. The COVID-19 pandemic has hampered the overall production of the automotive industry, thereby delaying the production and implementation of autonomous cars. Moreover, tightened government regulations aimed at ensuring road safety have also proven to be a barrier for automakers. However, with the significant improvement in AI-powered software and hardware technologies, we are seeing automakers launching their Level 2 and Level 3 autonomous cars on public roads.

For example, on June 25, CNBC reported that Waymo, a leading autonomous vehicle company, opened its self-driving robo-taxis to users in San Francisco. The company says more than 300,000 people have signed up for the service. To keep up with the growing number of users, Waymo One has deployed a fleet of 300 cars in the city.

According to a study by McKinsey & Company, automotive market leaders believe that the autonomous segment is less fragmented due to the complexity and investment involved in its operations. According to the study, 15% of respondents believe that in the future, most companies in North America will work and implement autonomous technology. In contrast, 38% of respondents believe that the European market is led by two or three companies at most.

Regionally speaking, China and North America are leading the race to become the first countries to pilot Level 4 highway technology. Survey respondents are evenly split, with 58% believing each country has the potential to be first with Level 4 technology.

As mentioned above, developing and deploying autonomous vehicles requires a huge investment in software technology. However, the investment is also expected to yield high margins. The study found that experts believe that autonomous vehicle software will have an average margin of 15%, with hardware technology adding another 10% to the margin, making the autonomous vehicle segment a lucrative venture for automotive companies.

The story continues

The Latest Trends in the Autonomous Vehicle Industry

New trends in the autonomous vehicle industry are paving the way for achieving Level 5 autonomy. Some of the latest developments in the industry include the use of the Internet of Things (IoT) to enable vehicles to connect with other vehicles, their surroundings, and the internet. This not only improves vehicle safety by providing rapid data collection and analysis to make timely decisions based on changes in traffic. New sensor technologies such as LiDAR scan the surroundings of the car using laser technology. When these LiDAR sensors move continuously using multiple laser sensors, they create a 3D representation of the surroundings, ensuring the vehicle drives safely and without collisions. Almost all Level 3 autonomous vehicles use LiDAR scanners to increase the vehicle’s visibility to about 300 meters during the day.

In addition, advances in AI such as object detection algorithms along with LiDAR help vehicles detect pedestrians, road signs, and other vehicles on the road. Other deep learning algorithms help improve the user experience through improved voice recognition, gesture recognition, and sentiment analysis to help in effective interaction with the vehicle. Last but not least, Big Data analytics techniques are being used by self-driving car manufacturers to improve vehicle autonomy by analyzing data collected through radars, scanners, and cameras.

Our methodology

To compile a list of the 10 best self-driving stocks to buy, we looked at the self-driving holdings of the Global X Autonomous & Electric Vehicles ETF. We selected the top 20 holdings from the ETF and ranked the stocks that were most widely held by institutional investors in Q1 2024. The list is sorted by ascending number of hedge fund holders of each stock.

Why do we care about what hedge funds are doing? The reason is simple: Our research has shown that we can outperform the market by mimicking the best stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (more details here).

A group of technicians in a garage inspecting car parts and ensuring compliance with safety regulations.

General Motors Company (NYSE:GM)

Number of hedge fund owners: 78

General Motors Company (NYSE:GM) is one of the leading designers and manufacturers of cars, trucks, and auto parts in the United States and the world. The company operates through the following segments: GM International, GM North America, GM Financial, and Cruise. General Motor Company (NYSE:GM) is one of the best autonomous vehicle stocks, as it was held by 78 hedge funds in the first quarter of 2024, with a total stake value of $4.79 billion. Diamond Hill Capital is the largest shareholder in the company, with a position worth $496.71 million as of August 11.

General Motors Company (NYSE:GM) has been actively involved in the development and deployment of autonomous vehicles through its Cruise subsidiary. The company has been testing its vehicles in various locations, most recently in Q2 2024, the relaunch of autonomous vehicle operations in Houston, Phoenix, and Dallas.

The company made significant progress in both the electric and autonomous vehicle categories. In the second quarter, General Motors Company (NYSE:GM) was able to increase U.S. deliveries of electric vehicles by 34%, demonstrating strong momentum in its electric vehicle portfolio. In autonomous vehicles, the company was able to reduce cruise operating expenses by $150 million year-over-year, reflecting operational sustainability and technological advances in manufacturing. Overall, the company was able to increase revenue by 7% year-over-year to $48 billion, driven by higher wholesale volumes and stable pricing across North America.

General Motors Company’s (NYSE:GM) competitive advantage lies in its ability to capitalize on the automotive market through sales volume and R&D capital expenditures. The company’s management has focused on reducing regulatory concerns about AVs and has decided to focus its next-generation autonomous vehicle on the Chevrolet Bolt EV instead of the Origin, a strategic move that will not only alleviate regulatory concerns but also lower unit costs.

General Motors Company (NYSE:GM) is an attractive entry point for investors. Its stock is trading at 4x its forward earnings, which is a 72% discount to its sector. Additionally, the company’s earnings are expected to increase by 52.4% in a year to $1.89. 29 analysts have a unanimous Buy rating on the stock, and their median price target of $55 implies a 27% upside from current levels.

In its Q1 2024 investor letter, Diamond Hill Large Cap Strategy provided the following information regarding General Motors Company (NYSE:GM):

Total GM takes 6th place on our list of the best self-driving car stocks. While we recognize GM’s potential as an investment, our conviction is based on the belief that AI stocks offer a better chance of achieving higher returns, and in a shorter time frame. If you’re looking for AI stocks that are more promising than GM but are trading at less than 5 times earnings, check out our report on cheapest AI action.

READ MORE: $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy, According to Morgan Stanley AND Jim Cramer says NVIDIA has ‘become a wasteland’.

Disclosure: None. This article was originally published on Insider Monkey.