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July 30, 2017, 7:29 a.m. EDT

Beyond Tesla: 7 stocks driving the autonomous car revolution

Look at these component manufacturers rather than Tesla, Honda and other car companies

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By Jeff Reeves, MarketWatch


Getty Images
Delphi Automative technology was in this driverless car that travelled from San Francisco to New York City.

To hear most car makers tell it, the driverless car revolution is already upon us.

From Tesla Inc. /zigman2/quotes/203558040/composite TSLA +0.61%  to Honda Motor Co. Ltd. /zigman2/quotes/207173990/composite HMC -2.57%   /zigman2/quotes/200490352/delayed JP:7267 -1.99%  to Daimler AG /zigman2/quotes/203566154/composite DDAIF -2.85%   /zigman2/quotes/205332368/delayed DE:DAI -2.86%  nameplate Mercedes-Benz, most automobile manufacturers are targeting 2020 as the year that fully autonomous vehicles will be ready for prime time.

But what does that mean for investors?

It’s hard to see how driverless cars will change the fundamentals of most auto makers in the next few years. Tesla clearly has its hopes tied up in the rapid growth of its electric vehicles — as well as its energy solutions that include lithium batteries and solar energy, which seem much more important to investors than any Autopilot upgrades. Legacy auto maker Honda booked about $33.5 billion in revenue last year, including sales of motorcycles and lawn mowers and other machines, so it’s difficult to believe that self-driving cars will become a material driver of this stock anytime soon.

On the other hand, companies that make components for these cars — namely, the high-tech semiconductors, sensors and software that make autonomous driving possible — could see their business boom.

A report by my colleague Therese Poletti last year called out chip makers as the biggest area of potential for investors. She quotes one expert’s prediction that the “world market for automotive semiconductors grew to $30.3 billion (in 2015), and is expected to hit about $41 billion in 2020.”

So which chip, software and component manufacturers are best positioned to cash in as autonomous cars hit the open road with more onboard technology than ever before?

Here are seven to watch:

Click to Play

How you teach a computer to drive like a human

Nvidia's general manager of automotive, Rob Csongor, breaks down how artificial intelligence can teach a supercomputer to drive just like (or even better than) a human.

Autoliv

Founded in 1997 with a focus on vehicle safety, Autoliv Inc. /zigman2/quotes/207149618/composite ALV -2.78%  used to be known simply as the world’s leading airbag manufacturer. But the Swedish company has taken the tech revolution seriously and has branched out into crash sensors, brake controls and features that offer night-driving assistance.

Clearly, there is only a small step between those technologies and a fully driverless car — and with an existing suite of technology that prevents crashes autonomously, one could argue Autoliv has put the most important part first.

With about $8 billion in its “ passive safety ” segment, the business is already closely connected with global auto sales in a big way.

Qualcomm

Qualcomm Inc. /zigman2/quotes/206679220/composite QCOM -1.37%  brings its own chipmaking might as a $80 billion semiconductor behemoth. But it isn’t just scale that this company offers, after spending $47 billion at the end of 2016 to acquire NXP Semiconductors NV /zigman2/quotes/202999625/composite NXPI -0.46% , which itself had acquired Freescale Semiconductor in 2015.

/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 718.99
+4.36 +0.61%
Volume: 35.61M
April 20, 2021 4:00p
P/E Ratio
1,144
Dividend Yield
N/A
Market Cap
$709.19 billion
Rev. per Employee
$445,694
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/zigman2/quotes/207173990/composite
US : U.S.: NYSE
$ 29.89
-0.79 -2.57%
Volume: 730,811
April 20, 2021 4:00p
P/E Ratio
13.01
Dividend Yield
2.17%
Market Cap
$52.88 billion
Rev. per Employee
$628,000
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/zigman2/quotes/200490352/delayed
JP : Japan: Tokyo
¥ 3,209.00
-65.00 -1.99%
Volume: 597,300
April 21, 2021 9:32a
P/E Ratio
13.36
Dividend Yield
2.56%
Market Cap
¥5749.73 billion
Rev. per Employee
¥68.28M
loading...
/zigman2/quotes/203566154/composite
US : U.S.: OTC
$ 89.10
-2.61 -2.85%
Volume: 22,745
April 20, 2021 3:59p
P/E Ratio
21.42
Dividend Yield
4.07%
Market Cap
$96.51 billion
Rev. per Employee
$609,774
loading...
/zigman2/quotes/205332368/delayed
DE : Germany: Frankfurt
74.06
-2.18 -2.86%
Volume: 15,077
April 20, 2021 8:59p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
N/A
Rev. per Employee
€560,333
loading...
/zigman2/quotes/207149618/composite
US : U.S.: NYSE
$ 94.64
-2.71 -2.78%
Volume: 511,638
April 20, 2021 4:00p
P/E Ratio
44.43
Dividend Yield
0.00%
Market Cap
$8.40 billion
Rev. per Employee
$122,089
loading...
/zigman2/quotes/206679220/composite
US : U.S.: Nasdaq
$ 133.40
-1.85 -1.37%
Volume: 7.47M
April 20, 2021 4:00p
P/E Ratio
22.80
Dividend Yield
2.04%
Market Cap
$156.59 billion
Rev. per Employee
$573,927
loading...
/zigman2/quotes/202999625/composite
US : U.S.: Nasdaq
$ 193.86
-0.90 -0.46%
Volume: 3.20M
April 20, 2021 4:00p
P/E Ratio
1,190
Dividend Yield
1.16%
Market Cap
$55.64 billion
Rev. per Employee
$296,966
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