A top exchange-traded fund holds most of the stocks leading the autonomous driving revolution.
Tesla (TSLA 3.46%) stock is up 47% since Donald Trump’s Election Day victory on Nov. 5. It isn’t necessarily because investors think the company is about to sell more electric vehicles (EVs) — in fact, its EV deliveries are on track to shrink in 2024 for the first time since it launched the Model S in 2011.
The stock is soaring because the Trump administration is likely to approach autonomous driving technologies with a relatively light regulatory touch. That means Tesla might be able to commercialize its self-driving software, and its new Cybercab robotaxi, with significantly less red tape in the way. Since analysts like Cathie Wood think the technology will be worth trillions of dollars to the company over the next few years, perhaps it’s no surprise the stock is already surging.
But with a price-to-earnings (P/E) ratio of 98, Tesla stock is currently three times more expensive than the Nasdaq-100 technology index, so buying it here might be a risky bet. Instead, here’s why investors might want to consider buying the Global X Autonomous and Electric Vehicles ETF (DRIV 1.01%).
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Every top autonomous driving stock packaged into one ETF
The Global X ETF owns a stake in 75 companies involved in the development of EVs, EV components, raw materials (like lithium), and autonomous driving.
Tesla stock is the biggest position in the ETF, which is good news for investors who want to own a slice of the EV powerhouse. But that isn’t the only familiar name investors will find in this fund. Below are its top five positions by weight:
|
Stock |
Global X ETF Portfolio Weighting |
|---|---|
|
1. Tesla |
4.32% |
|
2. Nvidia |
3.44% |
|
3. Microsoft |
3.04% |
|
4. Alphabet Class A |
2.92% |
|
5. Honeywell |
2.83% |
Data source: Global X. Portfolio weightings are accurate as of Nov. 29, 2024, and are subject to change.
Nvidia is one of the hottest stocks on Wall Street because of its data center chips, which are the most popular in the world for developing artificial intelligence (AI). But this company also has an entire automotive division. Nvidia’s Drive platform is an end-to-end hardware and software solution for car manufacturers looking to add autonomous capabilities into their vehicles. Brands like Mercedes-Benz, BYD, and Tata Motors‘ Jaguar and Land Rover are just some of Nvidia’s customers so far.
Microsoft is a leading provider of AI services to businesses through its cloud platform, Azure. It offers all of the tools companies need to create autonomous driving software, from data ingestion to product validation. Volkswagen and General Motors are just two of the leading brands using the platform.
Alphabet has a more hands-on role in the self-driving industry. Its subsidiary, Waymo, already completes 100,000 autonomous trips per week as part of its ride-hailing service in Phoenix, San Francisco, and Los Angeles. Customers can request a Waymo trip through Uber, and the partnership is about to expand into Austin, Texas and Atlanta. In other words, Waymo already has a big head start over Tesla, which doesn’t have approval to deploy fully autonomous vehicles anywhere in the U.S. right now.
Outside of its top five positions, the Global X ETF holds shares in General Motors, which is developing autonomous solutions with the help of its Cruise subsidiary, and Nio, which manufactures EVs and is partnered with Nvidia for self-driving technologies. The ETF also holds several stocks operating across the supply chain, like Pilbara Minerals and Liontown Resources.
The ETF could have a strong year in 2025
Despite strong year-to-date gains in Tesla and Nvidia, the Global X ETF is actually down 2% in 2024. That’s because it has positions in a number of big losers like Intel, which plunged 52% this year, Plug Power, which is down 49%, and Nikola, which has lost a staggering 93% of its value.
Losing money during a raging bull market in the S&P 500 index is never a good feeling. However, the ETF delivered a positive compound annual return of 8.6% since its inception in 2018, so long-term investors have made money.
If a looser regulatory regime under the Trump administration paves the way for widespread adoption of autonomous vehicles, the Global X ETF could be a fantastic buy right now. It might even have one of its best years ever in 2025, because self-driving affects so many of the stocks it currently holds.
With that said, investors should own this ETF as part of a balanced portfolio of other funds and individual stocks that don’t already have exposure to the autonomous driving industry. This technology is still in its infancy, and the road to success will have many twists and turns.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Intel, Microsoft, Nvidia, Tesla, and Uber Technologies. The Motley Fool recommends BYD Company and General Motors and recommends the following options: long January 2025 $25 calls on General Motors, long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
