When people look for a home-run investment, they tend to look at the lottery ticket types — a high-risk stock with an unproven business, hoping to get lucky and hit big. It’s great if a speculative investment works out, but you might be better off heading to the nearest casino and betting it all on red or black.
I think it’s better to go against the crowd and identify a fantastic business the market has doubts about. Look at what Warren Buffett’s investment in Apple became.
Contrary to popular belief, you can strike it rich on established, high-quality companies. Today, a well-known supercharged growth stock trades at a compelling valuation due to concerns about technological threats. It seems the market has gotten overly pessimistic, creating a fat pitch that could be a multibagger over the long term.
Here is what you need to know about the opportunity in Uber Technologies (NYSE: UBER).
Technological innovation has seemingly accelerated since artificial intelligence (AI) came into the spotlight in early 2023. The idea of autonomous (self-driving) vehicles isn’t new. Tesla and Waymo (Alphabet), the perceived leaders in vehicle autonomy, have worked on the technology for years. That said, AI seems to have greased the wheels of progress.
Tesla CEO Elon Musk noted in late 2023 that Tesla was converting approximately 300,000 lines of programming logic used for vehicle decision-making to a neural network, using AI and machine learning to interpret data. Tesla held a Robotaxi unveiling in October 2024 and has set goals to launch a fully autonomous ride-hailing service in Texas and California this year.
Waymo is even further along than Tesla. The Alphabet-owned company has launched autonomous fleets in a handful of U.S. cities. It’s already operating in Phoenix, San Francisco, and Los Angeles, with plans to launch in Austin, Texas; Atlanta; and Miami next.
Investors worry Uber won’t be able to compete with autonomous fleet competitors that don’t have to pay a human driver. Uber’s cost of revenue (primarily driver compensation) represented 60% of total revenue through three quarters of 2024, making it the company’s biggest expense by a wide margin.
The reasoning behind these concerns initially makes sense, but becomes flawed as you dive deeper.
Investors could be dramatically overestimating how imminent widespread autonomous fleets are. First, the technology itself isn’t close to perfected yet. Waymo has achieved SAE level 4, which qualifies for autonomous driving in some (not all) situations. Tesla’s self-driving technology is still SAE level 2, requiring human supervision from the driver’s seat. In addition, there are regulatory and liability issues, plus extensive testing for every state or market in which these companies hope to launch.
