Imagine getting ready for a night out with a friend. You’ve both just finished a long remote workday and are ready to blow off some steam. Instead of someone pulling the short straw to become a sober driver, an autonomous vehicle attracts. Your friend is already in the back seat, calling the way to the onboard AI system. This is the stuff of science fiction – literally – as now nearly 100 years ago, Czech physician and writer Miles J. Breuer “invented” the concept of self-driving cars.
At the time, it was considered a wild concept of a crazy novelist. But over the next century, Breuer’s conception of autonomy inspired countless science fiction books and films. Each together painted the picture of a futuristic society in which cars indeed drove themselves.
In all those years of self-driving science fiction, however, autonomy was nothing more than world building. That has changed in recent years.
Ninety years after Breuer conceived the concept, autonomy is becoming a reality.
These cars are on the road today. You may see an autonomous vehicle driving through several cities around the world, such as Phoenix, Boston, Berlin, London, and San Francisco. Today we are entering a fully autonomous era. And we see Real self-driving cars – without a human driver – on real roads in real communities.
google’s self-propelled unit waymo has started driverless taxi rides in Phoenix. Autonomous truck giant TuSimple (NASDAQ:TSP) has successfully completed multiple “driver-out” truck tests throughout Arizona.
In the entire country, Uber Eats uses a fleet of self-driving cars to deliver food and other goods. Dominoes (NYSE:DPZ) autonomously delivers pizza in Houston using mini self-driving cars. 7-Eleven has launched its own autonomous delivery service in California.
people, the Autonomous vehicle revolution has arrived† And it’s about to enter “hypergrowth” mode.
Accelerated progress expected in the next five years
As it has happened in recent years, the AV revolution will continue to evolve in waves. In particular, we see that it takes about 25 years and goes through five different “waves” or phases.
The first took place in the early 2010s and saw the transformation of self-driving concepts into working prototypes. We call this the “construction wave.”
The second wave took place in the second half of the 2010s and involved testing prototypes on real roads. It started with Waymo launching its autonomous taxi service in 2016. That’s why we call this the “Test wave.”
We are currently in the third wave of the AV revolution — the “Validation wave.” The previous wave was all about evaluating the technology. This is all about validating the value. Can these cars transport goods from point A to point B? Can they safely transport people without a fail-safe driver behind the wheel? Do they save costs?
The next is the “Commercialization wave.” Automakers will produce as many AVs as possible. We expect significant commercial gains and AV penetration growth in this era (2024-2030). During this period we see AV adoption increase from 1% to 50%.
Finally, we switch to the “Standardization Wave.” The hypergrowth era of AVs will end and this technology will simply be standardized for all cars. Growth will be stable and healthy, but much lower than during the commercialization wave.
Given this roadmap, we believe we are in the midst of the validation wave and about to enter the commercialization wave.
This next phase will be the fastest growing era of AVs during the AV revolution. And as earnings begin to grow at a triple-digit pace, we expect high-quality AV stocks to absolutely appreciate in value.
Thereafter, we believe this is the best time to buy AV shares†
The best way to play the autonomous vehicle revolution
We believe the best way to play this revolution is to invest in the core technology that makes it all possible. that is LiDAR†
Indeed, to unlock the full autonomous potential of self-driving cars, cars must be full “vision† They need a human-like ability to see and react to their environment.
Ideally, you want to do this with built-in cameras, as cameras save space and costs. But cameras have significant limitations that have proven difficult to overcome. So instead, laser light perception sensors called LiDAR have taken their place.
To get a sense of the car’s surroundings, these sensors emit laser pulses. Those rays go out, hit objects around the car and then bounce back to the sensors. Then the sensors carefully measure changes in the return radius to create a proxy for distance.
Do this thousands of times in a 360-degree view, and voila. You have a completely and dynamic “photo” of the environment.
Why Vision-Only Approaches Will Fail?
It is widely accepted in the AV space that the self-driving car of the future will include cameras, LiDAR and RADAR. Since it gives the highest resolution of a car’s environment, LiDAR will be the most important element in the stack.
However, this consensus opinion has some detractors, including: Tesla (NASDAQ:TSLA) CEO Elon Musk. He believes the future of self-driving is”only vision” — cameras only, no LiDAR or RADAR.
A person can drive a car with only two eyes and a brain. Why can’t a machine do the same with a few cameras and a robust AI processor?
Maybe sometime in the future. But today? No. It will not happen.
Compared to the human eye, cameras offer a low resolution and narrow viewing frame. But LiDAR uses short-wavelength laser beams to create a very high-resolution image with a wide viewing frame. In fact, two LiDAR sensors can do what dozens of cameras could…
And at the same time, LiDAR data has a low density – not so with cameras. It is structured 3D position data (X, Y, Z) with time. That means it is quite easy to handle. You don’t need an impossibly complex software system to understand LiDAR data. It’s very simple.
Barriers are coming down
Now LiDAR sensors are very expensive. That’s why Musk is so anti-LiDAR. When Tesla started self-driving cars in early 2010, LiDAR sensors cost as much as $75,000 per sensor†
But thanks to Wright’s law and certain technological improvements, costs have fallen sharply in recent years. Today, some companies make LiDAR sensors for less than $1,000. And most experts see those prices drop to $100 within the decade.
So… LiDAR produces high-resolution, easy-to-process data. And the cost of the sensors is popping up to match that of cameras and RADAR…
Certainly, LiDAR is the future of self-driving cars.
In particular, the self-driving car of the future will include: cameras (for color data), LiDAR (for high-res, near-field perception), and RADAR (for long-range observation in severe weather). And in that sensor suite, LiDAR will de most valuable and most important†
So… I repeat… the best way to play into the self-driving revolution is to buy LiDAR stock.
“Version 1.0” LiDAR
In the world of LiDAR stocks, you have the 400-pound gorilla in the industry, luminar (NASDAQ:LAZR† It is indeed a core holding in our Innovation Investor portfolio.
Luminar, like most other LiDAR makers, builds its sensors using something that Flight time (or ToF) techniques. This is basically the 1.0 iteration of cost-effective LiDAR sensors.
And as “Version 1.0” ToF has LiDAR: significant limitations†
These sensors emit laser pulses and measure the time it takes for those pulses to return to the sensor. They use the “flight time” as a proxy for distance.
ToF LiDAR sensors are cool. But they deliver a choppy signal that’s open to a lot of interference and noise. And because they send data in pulses, those laser beams can’t measure speed data either. Therefore, it is impossible to calculate the instantaneous speed accurately from the data.
“Version 2.0” LiDAR does not emit jerky laser pulses. Instead, it transmits a smooth signal that is interference-free and can calculate point speed.
And we know a company that is working on this next generation LiDAR that will rise on the back of the AV revolution†
The final word on the autonomous vehicle revolution
Autonomous vehicles are about to enter a hypergrowth phase from 2023 to 2030. And in anticipation of this acceleration, we want to buy and own as many high-quality autonomous vehicles as possible. That’s mainly because many are trading at or near the lowest level leading up to this major growth spurt.
The setup is quite convincing.
Stocks are being crushed today amid high inflation and fears of an impending recession. Those worries will pass.
Meanwhile, they give us the perfect opportunity to buy the powerhouse behind the AV revolution at a dirt cheap price†
Can we make 10x our money with this stock? Maybe even 20X or more? Absolute. It’s not a “certain thing” – far from it. But this is the kind of shot to take if you want to make big money in the markets.
At the date of publication, Luke Lango did not have any positions (directly or indirectly) in the securities referred to in this article.