Billionaire Ken Griffin Buys 2 AI Stocks Chasing a $1 Trillion Market Opportunity in Robotaxis (Hint: Not Tesla)

Light-duty vehicles travel over 3 trillion miles annually in the U.S., per the Bureau of Transportation Statistics. Ride-sharing services typically charge $1 to $2 per mile. So, even if autonomous driving technology cuts the price in half, robotaxis still represent a trillion-dollar market in the U.S. alone.

In the fourth quarter, hedge fund billionaire Ken Griffin bought shares of Nvidia (NASDAQ: NVDA) and Amazon (NASDAQ: AMZN), two stocks at the center of that opportunity. In fact, Nvidia and Amazon were the two largest positions in his hedge fund as of December. Interestingly, Griffin also sold Tesla during the fourth quarter.

Here's what investors should know.

Image source: Getty Images.

Nvidia: Ken Griffin's largest holding

Nvidia graphics processing units (GPUs) are the industry standard in accelerating artificial intelligence (AI) workloads. They regularly outperform accelerators from other companies when benchmarked across training and inference tasks. Those chips will be indispensable in developing robotaxis.

However, Nvidia also provides a rich software ecosystem (code libraries, frameworks, and pretrained models) that streamlines the development of physical AI applications, including autonomous driving systems.

• Nvidia Omniverse is a simulation platform. It allows developers to build detailed, physically accurate environments, such as factories or city streets.
• Cosmos is a set of world foundation models. They are the intelligence layer that generates, understands, and predicts actions in an environment.
• Alpamayo is a family of reasoning models. They provide the intelligence that autonomous cars need to perceive and navigate the real world.

Here's how those tools might work together: Omniverse simulates a complex network of city streets. Cosmos generates variations, such as different lighting or weather conditions, and creates synthetic data. That synthetic data, combined with real-world data, is used to train the Alpamayo models.

What happens next? The models are integrated into Nvidia's autonomous driving software stack, which runs on Nvidia hardware in the car. The company further simplifies robotaxi development with Hyperion, a blueprint that integrates hardware, software, and sensors into a standardized architecture that companies can use to engineer their vehicles.

Nvidia CFO Colette Kress recently told analysts that robotaxis could generate hundreds of billions of dollars in revenue over the next decade. She also said every major OEM (original equipment manufacturer) and service provider developing autonomous driving systems is using Nvidia technology in some capacity.

In the more immediate future, Nvidia has a substantial opportunity as enterprises continue to modernize data center infrastructure. Wall Street estimates the company's earnings will increase at 38% annually over the next three years. That makes the current valuation of 35 times earnings look cheap.

Amazon: Ken Griffin's second largest holding

Zoox is the only autonomous driving company that currently has purpose-built robotaxis on U.S. streets. Its vehicles lack steering wheels and traditional driving controls like pedals. Instead, they are basically carriages that move in either direction, with two opposing benches on the interior that seat four passengers total.

Amazon acquired Zoox in 2020. The company currently provides autonomous rides to the public in Las Vegas and to a more limited group in San Francisco. It will expand its service area in both markets this year. Zoox has also started testing robotaxis in Austin, and it will begin testing in Miami later this year.

Zoox currently operates its vehicles under a "demonstration exemption" from the National Highway Traffic Safety Administration (NHTSA), which means it cannot yet charge for rides. However, the company recently submitted an application to operate a commercial ride-sharing service with as many as 2,500 robotaxis. The NHTSA will make a decision in early April.

Morgan Stanley expects Zoox to account for 12% of autonomous rides annually by 2032. If the analysts' other assumptions are correct, that would put the company in fourth place behind Alphabet's Waymo, Tesla, and Uber. That means autonomous ride-sharing could become a big revenue stream for Amazon over the next decade.

In the more immediate future, Amazon has substantial opportunities in its core businesses of e-commerce, digital advertising, and cloud computing. Wall Street expects the company's earnings to increase at 19% annually during the next three years. That makes the current valuation of 29 times earnings look attractive. In fact, Amazon's price-to-earnings multiple hasn't been this low at any point in the last decade.

Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Nvidia, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.