Summary
- Speculation is already building around services like Uber and car makers like Ford.
- The key to the market is that the self-driving car is a computer.
- Why I like Alphabet for the win.
The next great market speculation has already begun.
It's the self-driving, autonomous car. In the hype over the Internet of Things, this is the ultimate thing.
The question is, who will win the race to deliver these in quantity, and how will they reach the market?
Most analysts are banking on privately-held Uber (Private:UBER) or Lyft (Private:LYFT) to make this work, in cooperation with car companies like General Motors (NYSE:GM) and Ford (NYSE:F). The thinking is that autonomy will make these cars a service, not a product, and that the car companies will be able to scale-up production quickly.
But here's a clue for y'all.
A self-driving car is mainly a computer. A self-driving car is interfaces, it represents software, and integration of chips with instrumentation, something that already exists but will just happen on a deeper level than currently.
The unquestioned leader in this is Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), which has been working on the problem for a decade and is announcing a tie-up with Ford this week to produce them. This is why CEO Ruth Porat insisted that the company be broken into functional units. It's so that those investment areas that look most promising, like this one, can be split-off and attract capital on their own.
If Google is doing something, however, Apple (NASDAQ:AAPL) is going to do it, if only from necessity. This is today's version of the "Great Game," in which the top tech companies seek to top one another with each generation of opportunity. What happened in devices, then in cloud, is going to happen here as well. The parts will come from companies like GoPro (NASDAQ:GPRO) and Intel (NASDAQ:INTC), but it's the system integrator, the computer company, that will pull it all together and be first to profit.
My best pick for a 2016 speculation in this space, then, is Harman (NYSE:HAR), not because it is doing this but because it is so well-positioned to do it, in conjunction with luxury car brands like BMW (OTCPK:BAMXY), Porsche (OTCPK:VLKAY) and Ferrari (NYSE:RACE). Apple could easily snap up Harman, which has a market cap of $6.7 billion, and use its contacts to get into this race quickly. So, for that matter, could Microsoft (NASDAQ:MSFT), which until now has also been sitting this dance out.
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