A few years ago, two companies exploded in popularity.
They sparked a great debate about the future of transportation.
Everyone downloaded mobile apps for the ease of hailing a car at their convenience. Uber Technologies Inc. and Lyft Inc. forever changed the way we commute.
At the time, I knew it would be a short-lived debate. Whether ride-sharing or taxi operations would survive wasn’t important. I thought self-driving technology would kill them both — and I was right.
Both companies announced their initial public offering (IPO) recently, giving excited investors an opportunity to hop on the rally.
But now it’s too late. Their futures rely on something much more complicated to survive: self-driving cars.
And today this technology is a reality. It will be the end of traditional ride-sharing as we know it.
Uber and Lyft know this as well.
And if you are investing in these stocks, you have to understand the extreme amount of risk you are taking.
Let me explain…
Uber and Lyft Are a Risky Bet
To learn more about the risk behind these two popular IPOs, watch my video below.
Uber was spending $20 million a month chasing self-driving cars. And last year Lyft used the popular Consumer Electronics Show (CES) in Las Vegas as a publicity stunt. The ride-sharing company offered free semi-self-driving car rides.
These two companies know where the future is going. And there will be plenty of ways to profit from it.
But Uber and Lyft are risky bets on that future.
They announced their IPOs as ride-sharing firms. But the two are investing in what will be the biggest threat to their current platforms.
That’s great news! But the issue is that these are not the only two companies racing to develop self-driving cars.
Both are going up against tech giants. Consumer technology retailer Apple, and Alphabet, the parent company of Google, are both working on developing this coveted technology.
Tesla is the furthest along in developing self-driving technology. It is also in an excellent position to capitalize on the shift.
All three companies offer something Uber and Lyft don’t — a backup plan. But I wouldn’t recommend any of these tech giants as a way to profit on self-driving cars.
Those three companies have other core services to provide and continue to grow.
Uber and Lyft don’t have that. They are working furiously to develop something new. Without it, they both could be bankrupt within the decade.
That kind of uncertainty makes those two popular IPOs a risky bet.
And if your goal is to profit from the coming self-driving car revolution, there’s a better way. Semiconductor stocks will be the foundation in this tech revolution.
VanEck Vectors Semiconductor ETF: Your Best Bet
Semiconductor companies produce computer chips. These computer chips are what make self-driving cars possible.
They will be the foundation to its success.
And having exposure to these foundational stocks is critical. It gives you a much better chance to profit and reap the rewards from self-driving cars, instead of finding the winning company.
Uber and Lyft are betting everything on developing this technology.
If they fail to do so, or are late in the process, their stocks will plummet. Ride-sharing as we know it will be a thing of the past once we have self-driving cars.
Chip stocks will grow from all of the benefits self-driving technology will bring to the table. According to Statista, the growth rate for semiconductor chips in 2018 was 15.9%. And worldwide sales revenue sits at $490.14 billion. These numbers are only going to climb in the years ahead.
These chips will be in high demand to power self-driving cars and trucks. And the advancements will also lead to improvements in the smart home items we see today.
That makes betting on semiconductor stocks an easy investment. They stand to benefit from multiple growth avenues in the coming years, including self-driving cars.
The best way to get exposure to these stocks is through an ETF that holds 25 of the largest U.S. chip stocks: the VanEck Vectors Semiconductor ETF (NYSE: SMH).
The market has experienced weakness in recent weeks. Now is an excellent time to be investing in these semiconductor stocks as they surge from the rush to self-driving cars.
Chad Shoop, CMT
Editor, Automatic Profits Alert