2 Robotaxi Stocks to Buy Before the Market Catches On

Key Points

The world of robotaxis will be a reality faster than most people realize.

Two robotaxi stocks in particular will benefit -- albeit in different ways.

• 10 stocks we like better than Rivian Automotive ›

One of the biggest growth opportunities in history is now upon us. Thanks to rapid advancements in artificial intelligence, autonomous driving is quickly becoming a reality. A growing number of industry experts believe this will be a multitrillion-dollar opportunity.

But here's the thing: The first autonomous driving market won't be private cars. Instead, investors should be paying attention to robotaxis. And there are two stocks in particular ready to benefit from this nascent market.

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2 robotaxi stocks primed to break out

When do you expect the robotaxi market to reach meaningful scale globally? I'm not talking about a handful of pilot services operating in select metro areas as is the case today, but a fully operating market in nearly every major country worldwide. This future could be much closer than most people expect.

"Autonomous vehicles are on the on-ramp to full deployment," concludes a recent report from global consultancy McKinsey & Co. "While L4 robo-taxis are now available in the first cities in the United States and China, the global rollout of robo-taxis is now expected to become reality at a large scale in 2030."

By 2030, then, the robotaxi market may have already reached a critical stage of maturity. And investors should know that this will likely happen before most people have private access to self-driving vehicles. "Overall, experts expect that robo-taxis will be the first commercial application for L4 in mobility--not privately owned cars," McKinsey & Co. stresses. "The industry is getting closer to at-scale realization."

There are two ways to invest in the rapidly forming robotaxi opportunity. The first approach is to invest in companies with the highest likelihood of taking a big share of this fledgling market. If you opt for this route, Tesla (NASDAQ: TSLA) stock is the obvious choice.

Tesla has a few major advantages when it comes to taking the robotaxi market by storm. Under CEO Elon Musk, Tesla has invested heavily in both AI and self-driving technologies. The company already has extensive production infrastructure that will allow it to quickly scale up production of robotaxi vehicles. And with a $1.3 trillion market cap, Tesla has the capital and resources necessary to deploy pilot tests of its robotaxi service in key metros, even if a full-scale rollout remains years away. Of course, Tesla's market cap already reflects much of this potential. But there's no denying that Tesla has a clear path toward attaining robotaxi dominance.

The second approach is to invest in smaller competitors that, while at a competitive disadvantage, have more raw upside potential. If you're keen to accept higher risk for more reward, Rivian Automotive (NASDAQ: RIVN) is the clear choice.

Earlier this month, I wrote about Tesla's robotaxi potential; I also listed Rivian as a promising investment, even though the company lacks Tesla's resources and existing scale. Rivian's market capitalization remains well under $20 billion. Yet the company is investing heavily in AI and autonomous driving, the success of which achieved early validation through a $1.25 billion order from Uber Technologies. Without its own manufacturing arm, Uber is relying on Rivian to build up to 50,000 vehicles to power its robotaxi division.

Tesla will both make its own vehicles and operate its own robotaxi service, while Rivian will likely be just an industry supplier. But both stocks have massive exposure to the robotaxi market.

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.