If you’re in any doubt of just how significant driverless cars are to the markets, as well as the world, you need only glance at the news this week.
One of the biggest and most recognisable names in the tech world – Intel – announced it’s agreed a $15 billion deal to buy Mobileye, a firm with key driverless car technology and market position. It’s the second largest deal ever made by Intel.
What does a deal like this tell us?
On one level that’s simple. Intel has an established and powerful position in the tech industry already. Now it wants to establish a beachhead in new tech industry – driverless cars.
Let’s call it assets and access for shorthand. By acquiring Mobileye, it buys itself an asset – technology that could be vital to the industry in the future – and access to businesses using that technology, through Mobileye’s existing contracts with car manufacturers.
It’s just another data point in a story we’ve been talking about since the very inception of Exponential Investor. Driverless cars are coming. They’re going to be disruptive for the world and the markets. And the time to move on them is now.
But perhaps there’s more to it than that. After all, it’s just one deal among scores of positive developments for the industry – anyone with half an interest in the technology can see what’s coming.
Perhaps it’s more interesting to look at this from a private investor’s point of view. What does the deal reveal about your own investing?
Well, that depends on whether you were invested in Mobileye. I say that, because Frontier Tech Investor readers were. Eoin Treacy recommended the company in January. We’ve just closed the position for a 59% gain. Not bad for two months.
Here was Eoin’s rationale when he recommended the share in January. It more or less sums up why Intel would want to stump up $15 billion:
I’ve been looking at one particular firm because it represents a pureplay on one of the three primary research fields that are vital to the field of driverless cars.
These are: motion, artificial intelligence and optics. The firm is Mobileye and I’m adding it to the portfolio today. The simple reason for this is that Mobileye has technology that provides a vital “skill” all cars need if they’re to drive themselves. It helps them see. Mobileye’s primary business has been delivering sensors and cameras with the required artificial intelligence to power them.
It’s a firm with some impressive clients already. And it’s going head-to-head with one of the biggest beasts in the tech world for supremacy.
If you’re a Frontier Tech Investor reader you’re probably feeling pretty pleased with yourself this week. Eoin classed the share as a “moonshot”. And while it didn’t quite pull off the triple-digit gains that are possible with these opportunities, it’s still satisfying to see that other people have recognised the potential of the company.
If you didn’t move on it – despite the fact I banged on about driverless cars for most of December and January – I can only ask why. I don’t believe anyone can seriously argue that driverless cars aren’t coming in a big way.
I mean, look at the evidence from the last couple of years:
August 2015: Audi, BMW and Daimler pool together to purchase Nokia’s mapping technology for $3.1bn to integrate into driverless cars.
March 2016: Toyota commits $1 billion to artificial intelligence technology exclusively for driverless cars.
July 2016: BMW promises to deliver a fully autonomous iNEXT car by 2021.
Nov 2016: Apple allocates huge resources to “Project Titan” – its mission is to develop a driverless electric car in the next two years.
Dec 2016: Uber launches a beta-fleet of driverless taxis in Arizona.
THIS year: Volvo will offer fully autonomous cars to customers. The vehicles will be used for commuters along a 31-mile pre-designated road in Gothenburg, Sweden, and they will engage in real-world traffic situations.
NEXT year: Chinese tech-giant Baidu is already testing fully autonomous cars on public roads. It plans to have driverless shuttles on the road next year.
I could go on. But you get the picture.
There’s an enormous amount of evidence to back up the idea that driverless cars are virtually inevitable and are going to have a real commercial impact.
The only good reason I can think of not to invest is risk. Some people don’t like the idea of taking a big risk. They want to make sure something is a “sure thing” before they invest. (Nothing is ever a completely sure thing. But there you go.)
If that’s you – well, you know what’s best for your money. Though we do put Exponential Investor together with the goal of showing you how to take a controlled, informed risk with your capital. We’re an investment publication. Our mission is to help you understand and make money from technology – alongside our sister publication, Frontier Tech Investor.
The only other reason I can think of is personal bias. Some people don’t like the idea of driverless cars, so they assume they won’t catch on. Newsflash! If that’s you: that’s not how the world works. Don’t let personal bias blind you to obvious opportunity. The 59% gain Frontier Tech Investor readers just banked is testament to that.
If you want to see what else is in the portfolio today, you can take a trial (which means if you don’t like it you get a refund).
Should you be allowed to buy cannabis stocks?
Speaking of personal biases and investment opportunities… I should touch on cannabis stocks.
As you may well know, Eoin has pinpointed a stock to play the legalisation of cannabis in the US. It follows California’s legalisation vote last year.
The pick has generated a lot of interest… and controversy. I suppose both are understandable.
First up, the interest. Legalisation in the US has kicked off a pretty manic speculative boom. I have no doubt that fortunes will be made and lost in the sector. I know of 11 different cannabis stocks that multiplied by more than 1,000% last year. Expect extreme volatility to continue.
The commercial implications are more widespread than that though. Legalisation is reshaping people’s consumption habits. A report earlier in the week predicted that the beer industry could lose more than $2 billion in retail sales due to legal marijuana.
It’s understandable people would want to invest in this. It’s a sweeping social change with financial implications. If you’re a risk taker you can see the attraction.
But with it comes controversy. I expected that. Although I’ve been surprised by the news that many UK brokers don’t offer shares in Eoin’s pick on “moral” grounds.
If a company is publicly listed and isn’t breaking the law, what grounds does a broker have to impose their own moral judgement on its purchase? No one is forced to buy it. Just as no one is forced to read Exponential Investor. We don’t seek to impose our morals on you. Why should anyone else?
Using morality as an excuse for prohibiting a purchase opens you up to charges of hypocrisy. If morality is the problem – not legality, morality – then why sell shares in companies that sell fags, booze or weapons? Why sell shares in a bank that has been proven to break the law by aiding money laundering?
Because there’s more money in it, that’s why. Cannabis is only just being legalised in US states. It’s still a small industry. If it does become a $20 billion plus sector, as is forecast, expect brokers to change their moral stance pretty quickly.
You can read our report on the “Green Rush” here. Remember our stance: we’re not here to tell you what’s right or wrong. If you don’t like the idea of legalised marijuana, don’t read the report. It’s your call. Just keep in mind that if you want in… you need to be prepared to be a little adventurous and find a broker who’ll offer the shares.
Until next time,
Publisher, Exponential Investor