2 Robotaxi Stocks to Buy in September for the Next Decade of Growth

The global robotaxi market could be huge. "We think $8 trillion to $10 trillion for the entire autonomous taxi opportunity throughout the world, from almost nothing," predicts Cathie Wood, the CEO of Ark Invest. "That's how quickly AI is going to cause these things to happen."

Before jumping in, however, investors should consider how long it might take to reach Wood's predicted market size. Autonomous vehicles have been promised for decades. Tesla (NASDAQ: TSLA) CEO Elon Musk has repeatedly told investors that full self-driving capabilities are just around the corner. His predictions have occasionally come true, but often years later than his guidance suggested.

Last year, McKinsey & Co. pushed back its timeline for robotaxis due to slower-than-expected growth. "This year's survey indicates that adoption timelines for autonomous vehicles have slipped by one to two years on average, relative to the 2023 survey," the firm admitted. "Adoption timelines for autonomous vehicles continue to grow."

But here's the thing: According to a growing number of experts and industry insiders, autonomous vehicles really are just around the corner. "I think the technology problem is pretty much already solved," James Peng, the CEO of a large autonomous driving software business, said at Fortune magazine's Leaders Forum in Macao on Sept. 8. Peng believes robotaxis will reach widespread market penetration globally within five years, a view many other analysts agree with.

Investing in robotaxi stocks should only be done with a long-term view. If you're willing to keep a multi-year investment horizon, two robotaxi stocks stick out as promising options.

Image source: Getty Images.

1. Tesla remains the market leader

Tesla has been preparing for the robotaxi takeover for years. Its actual robotaxi service launched last summer. Earlier this month, the company officially added Cybercabs to its robotaxi fleet -- vehicles designed specifically as a self-driving taxi, with no steering wheel or pedals. Its robotaxi vehicles, of course, rely on Tesla's self-driving software, which has seen more than $10 billion in investment in recent years.

Tesla's strongest competitive advantage is its vertical integration. The company has a large existing manufacturing base, with full autonomy on when it builds its vehicles, where it builds them, and how they're designed. Competing services such as Uber Technologies (NYSE: UBER), for comparison, have to buy their vehicles from third-party suppliers, adding cost and complexity.

Many analysts project that this vertical integration will grant Tesla a structural cost advantage, allowing it to launch more vehicles at a faster pace than the competition with the same capital outlay.

2. Rivian is a high-upside stock despite added risk

Rivian Automotive (NASDAQ: RIVN) is taking a very different approach. Instead of operating its own robotaxi fleet, Rivian has positioned itself as an industry supplier. In March, for example, Rivian agreed to supply Uber with up to 50,000 vehicles in a $1.25 billion deal. As mentioned, many of Tesla's robotaxi competitors lack their own manufacturing capacities. Rivian is looking to fill that gap.

Rivian has some serious disadvantages versus a larger robotaxi peer like Tesla. The economics of vehicle manufacturing likely won't prove as attractive as operating an asset-light robotaxi service. (Tesla plans to have third parties purchase and manage fleets of robotaxis, with Tesla taking a cut of every ride.) Rivian also lacks Tesla's name brand recognition and profitability.

In short, Rivian has higher execution risk when it comes to targeting the nascent robotaxi market. But with a valuation of just $23 billion -- 98% smaller than Tesla's current valuation -- these risks may already be reflected in the company's stock price.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.