Motley Fool Hidden Gems Investing - The Autonomy Economy is Accelerating

Starting point is 00:00:00 autonomy is kicking into high gear in 2026 this is motley fool money welcome to motley fool money i'm tyler crow and today i'm joined by longtime fool contributors lou whiteman and pulling spot duty today we've got travis hoy i'm the host of the wednesday and Friday shows. We're going to take the pulse of the race for autonomous everything, really, not just driving. We're going to talk about some stories that we've been following, such as oil prices, private credit, whatever fits your fancy. But before we get started, we're going to talk about AI, specifically open AI. Now, guys, there's a lot of AI companies out there. Quick pulse, when you're going to go use an LLM or anything like that, do you have a preferred one?

Starting point is 00:00:57 depends on what i'm using it for gemini is kind of my go-to for just random questions but i've been using claude to kind of build stuff a little bit more experimenting with that so those are the two that i use i do not open chat gpt anymore see i'm part of the problem gemini if i'm on my phone because that's just right there but claude if i'm actually sitting at a desk and typing on a computer and that kind of gets to what we're going to be talking about here because you guys both just mentioned, Gemini, Claude, which is Anthropic, and me, probably the most technologically Luddite person in their 40s. I've been going to Claude because it is incredibly useful. And that is the topic, is OpenAI, because we didn't mention ChatGPD when we were talking

Starting point is 00:01:39 about this nearly as much as the other ones. And this is why we wanted to get into this. Last week, the company announced it was planning to double its headcount as a push to win back market share from Anthropic. Then this week, news broke that Walmart was ending its agentic commerce deal with OpenAI after Walmart kind of said, you know, the results were not great in terms of conversions and things like that. And then there was a leak that the company was looking to raise money from private equity, and they were guaranteeing as high of as a 17.5% return for preferred investments before an IPO. Now, I know I'm probably missing quite a few headlines here, but I think what's striking is that the narrative around OpenAI has shifted from like six months

Starting point is 00:02:18 ago when we were talking like signs incomprehensibly large dollar figure deal with supplier to today. It's like, try to make a coherent business that makes money out of this. We even got a Sheryl Sandberg-esque profile of Fiji Simo, who is OpenAI's head of product today. It was a business insider, I think last week. And this all comes when we assume like a couple of months from now, the OpenAI is planning to go public. And I'm sure there's a fair amount of listeners here interested in OpenAI as a potential investment or a stock when it is available. So I want to put this to you both. Based on what we've seen so far, kind of these news stories and the shifting narrative that we're seeing with OpenAI, what would you need to see from OpenAI that would

Starting point is 00:03:01 make you interested in the stock should it go public in, say, like the next 12 months? And Travis, you're the fill-in guest here, so you get to go first this week. I have got to see a real business model. And I think that's always been the challenge for me with open AI is how do you make money? If you look back historically on some of these phenomenal companies, so Alphabet, Microsoft, they were profitable before they ever went public. It's really a relatively new phenomenon that you have the Ubers of the world that are still burning through money a decade or more after they began, still trying to build that mass of customers. But there was a real benefit for being the aggregator there, the ultimate winner. I'm not

Starting point is 00:03:37 sure that's the case with artificial intelligence. And so if you don't have a business model to start with. You're not going to beat Google and Amazon and all these other companies in advertising. So what are you going to do? Are you going to be subscriptions? Are you going to follow Anthropic into this enterprise market? That was the thing. It's a little bit unclear. The headlines were the 17.5% guaranteed return. What the reporting is, is those were enterprise AI development deals. So there would be a joint venture. But even then, if you're guaranteeing a private equity investor, a 17.5% return before you get anything back from those joint ventures, that's telling you that you're not in a great position to be raising funds.

Starting point is 00:04:18 And I think that sort of shows the weakness. And then Walmart backing out of their agentic AI. So many times they've thrown spaghetti at the wall and we've found that it hasn't actually stuck. Walmart, this was supposed to be the big deal, agentic shopping. Just go into ChatGPT, say, you know what? I'm going to Florida. I need a new swimsuit. Find something for me. It doesn't seem like it's working. And that's

Starting point is 00:04:41 really a challenge because investors, eventually we're still in the hype cycle, but eventually they're going to say, how are you going to actually turn this into a real business? And they don't have a great answer from what we know right now. That's exactly. Yeah. And I mean, there's a huge history here. What was it? I'm blanking on the name of that virtual reality company that it was the huge whale splashing down and a school gymnasium and that everybody loved this thing and it just wasn't a business. And we are, OpenAI has nailed the parlor tricks portion of this revolution. Whether or not they can nail the actually make money off of it kind of remains to be seen. If this ends up, and again, it seems like that the Walmart experiment

Starting point is 00:05:20 was, they just were getting fewer conversions. So it's just kind of, if this ends up a trillion dollar version of the search engine that happens to burn down the rainforest every time you use it, that's going to be not money well spent. What do I need to see to be investing? I need to see that this is actually a sustainable business at a valuation that it's been assigned at something near what private equity has put in. Otherwise, if and when it does go public, those investors are going to be racing for the door and it's going to mean it's not a very good investment for the bag holders, us last people in. Yeah. And with the numbers that they're putting out for an IPO valuation is approaching a trillion dollars. It is pretty astounding.

Starting point is 00:06:03 Because it has to be. Yeah. And doing so while somehow not quite figured out the monetization strategy is quite astounding. And reading the tea leaves between the three, it's no secret. I think we're all a little dubious about open AI compared to what's going on, at least from a product perspective, compared to Claude, Gemini, what the other companies are doing this. but one thing that I do want to try to remind myself as an investor is that whatever we're seeing from any of these companies, it's probably the worst version of whatever product they're going to have put out from here. It's like watching a rookie in

Starting point is 00:06:37 football, basketball, baseball, whatever. It's like, this is probably the worst they're going to be for much of their career. And that drives home like a challenging topic for investors, like looking at this space. This is an extremely fast moving industry. And six months from now, a new AI model from any of these companies could come out and blow everything else out the water. With that in mind, like you as investors looking at, you know, whether it be the LLMs or the picks and shovels or whatever part of the AI universe that you're looking at, how are you approaching investing in this space right now? So if we are moving towards commoditized models, and I think at least for the generalists, we are moving towards kind of commoditized models,

Starting point is 00:07:18 access to the consumer is what matters. That's what OpenAI is really trying to fight. The fact that they don't have this installed customer base. Alphabet, Microsoft, way out in the lead for me. They can just shove these new innovations at their existing user base, see what sticks, iterate from there, whatever they want. OpenAI ramping from zero, that's a much harder game to play.

Starting point is 00:07:42 I don't know if I really want to invest in anything just based on AI glitter right now, but there is a there there. And it seems like the established players are the best able to profit from it, at least for now. Yeah, these big direct AI plays. I'm largely staying away. I own shares of Alphabet.

Starting point is 00:07:57 That's one of my bigger positions. But that's because exactly what Lou said. They own the customer base. They own the methods of distribution, things like Android, YouTube. There's tons of ways that my wife uses Google and just happens to be using their artificial intelligence tools because they just build it into search. So they've got the monetization model. They have everything that OpenAI should be trying to build.

Starting point is 00:08:17 But the way that I'm thinking about this largely is that historically we go through hype cycles. So we go through this, it's called the Gartner hype cycle. We go through a hype cycle, you get really high valuations. Companies eventually go public and then the bubble bursts or something happens and the economics don't kind of live up to that. So then high valuations that we typically put on these kinds of companies come back to reality. And that's when you get to what's called the trough of disillusionment.

Starting point is 00:08:39 That's where I want to be finding those winners. That's where I want to look at who is the companies that survived the dot-com crash. Who's the companies, the banking companies or the solid companies that survive the Great Recession? When we get to that point, I'm trying to follow this closely enough that I'll be able to at least have a reasonable expectation of understanding who those winners are. But right now, I'm not really interested in buying into the hype cycle because that's typically not a great place from a risk reward perspective for investors. Yeah, it's a great kind of takeaway message when you think about patient long-term investing, we always think about it as

Starting point is 00:09:15 patiently holding something through the ups and downs, but there's also patiently buying at the right time when you're looking at certain types of investments, like you said, when you go through hype cycles, trough of illusion, things like that. After the break, we're going to do a check-in on the advancements in autonomy. The 2026 Chevrolet Trax is the stylish SUV for those on the move. And with the standard Chevy safety assist package, you have the backup to handle every turn with confidence. The 2026 Trax. Start your build at Chevrolet.ca. AI and autonomy seem to go hand in hand these days, in large part because AI is required to make things like autonomous driving work. It's a story we've been following quite a bit. I know, Travis, you did a show quite a while

Starting point is 00:09:56 back doing like a breakdown of the whole industry. It's a fascinating topic we want to keep checking in periodically. And like the story we just had on OpenAI, a lot of these AI companies that are starting to pivot towards viable businesses, we're seeing this in autonomous driving and autonomous delivery as these companies are expanding their offerings at pretty drastic paces here in 2026. Waymo, which is from Alphabet, they've already operating in 10 cities with another 21 listed on their up next on their website. Amazon subsidiary Zoox announced that it's targeting making its autonomous taxis a paid service in Las Vegas by the middle of this year. Tesla is always lurking in the background. It's announced some ambitious plans on how many

Starting point is 00:10:36 robotaxis have wanted to put on the road. It's working in Austin. I think the Bay Area still right now, I haven't heard recent updates beyond that, but it's all moving pretty fast so far this year. And it's not just autonomous driving either. Alphabet subsidiary Wing this week also announced its plan to start an autonomous drone delivery service earliest this year in the San Francisco Bay Area. I think it's fair to say that 2026 is going to be the year where the wheat separates from the chaff in autonomy. I don't think that's going to be hyperbole here to say this is going to be a massive year for how these things shake out. I don't think I'm being way off course here, don't you guys think? And what are you seeing in the autonomy market today that excites you the

Starting point is 00:11:16 most? Lou, I want to start with you. So this is a terrible day to ask me this question, Tyler, because last night I was late for a dinner reservation because there was a Waymo trying to figure out a three-point turn. And it just, we literally, traffic stopped in both directions for it. Talk about first world problems, Lou. They are everywhere. And, you know, I mean, I guess to their credit, it eventually did it. And wow, I'm talking about a driverless car trying to navigate streets. And so that is kind of cool, right? I don't know if this is a year where the have separates from the have nots simply because if we're honest, a lot of the so far have nots have done a very good job of presenting themselves

Starting point is 00:11:53 as not trailing. And we're still in that phase where if you are making progress, you're still in the game. You know, I don't think it's first mover advantage is really going to matter if you get there eventually. But I do think it's worth noting the progress that some are making. I, kidding aside, I'm very excited about Waymo and Zox and the Robotoxys that are out there. I'm less excited about server robotics and delivery bots. I don't know what to think about wing drone delivery, but I think it's there. You know, I think we need to celebrate this incremental progress. I know it's boring. I know we want to take hot takes. It's here. It's this is the year, whatever. But incremental is how this is going to happen. And as I said, it is

Starting point is 00:12:34 pretty amazing that I was watching a robot car on the streets last night trying to figure out a three-point turn, and it kind of was just la-di-da boring. As investors, it's close enough to pay attention to this. It's definitely we're making progress, but I don't know if we should really be expecting a payoff anytime soon. Yeah, it's wild that we were writing about this as kind of the next big thing a decade ago. And now we're kind of at the point where it's actually here. I think the big thing in 2026 is we're finding out who can actually do the thing. So you have Waymo really starting to scale their business. They have proven the safety of their vehicles. Let's not forget, Zoox is operating a vehicle that had to get approval from the

Starting point is 00:13:18 government to not have a steering wheel or pedals. Tesla does not have that approval with the robo-taxi that they have at least shown people. Then you have companies like Mobileye, Neuro, May Mobility. There's at least a half dozen more that are testing with a safety driver today with plans to pull that safety driver potentially by the end of this year. So we're really getting to that point,

Starting point is 00:13:39 that show me point of can you operate in even a single city with no safety driver in the vehicle and operate efficiently and effectively? The next challenge is probably even bigger. That's what is the business model behind this. You know, the theory with a company like Tesla was always, they were going to own transportation demand forever. I think with this many suppliers, that's not going to be the case. So do these other companies have a sustainable business model? And that's where I think as

Starting point is 00:14:05 investors, you know, you've got to look at, should we be counting out the Ubers, the Lyft, DoorDash, even retailers that have a physical location? The hardware business is really hard and even technology hardware. If you have followed the auto industry for any period of time, you see these periods of great profitability, stocks still go nowhere, you have low price earnings multiples, and then eventually a company goes bust. We're going to see the exact same thing in autonomy because I don't think that this is playing out in a winner-take-all space. That said, there are going to be companies that are going to get to that very real doing the thing phase by the end of this year, and that's exciting. I think this sets it up really well because

Starting point is 00:14:43 you kind of laid out the various ways that we can kind of invest in autonomy. It's not just we have to invest in Alphabet or Amazon with their ride share business or Tesla. There's the hardware suppliers. There's the... How would we describe Uber and Lyft? It's like a network provider app, I guess. The aggregators of demand would be the way that I would... There's tons of ways that we can actually invest in autonomy in this. This was just, again, that was just the driving part. We could be talking about autonomous electric vertical takeoff helicopters or the replacement for that or delivery, as Lua alluded to with serve robotics, lots of options, picks and shovels. We could be looking at especially

Starting point is 00:15:21 component manufacturers or just the tech giants because they're just like these little subsidiaries on a giant multi-trillion dollar company. So as you both look at the landscape, there's a lot of opportunities here. Where do you see the most lucrative ones? I'm going to start with the things I think I know. If we are not going to be in a world of vertically integrating where a Waymo or a Tesla just eats everything in autonomy, I think that the companies that are aggregating that demand, the Lyfts, Ubers, DoorDash, any of those companies in that space are probably going to be fine. That's why we're seeing a ton of partnerships from those companies. I wouldn't be surprised if we see one get bought out too. Does Amazon want to pull all this? They've got

Starting point is 00:16:01 a ton of demand. Do they want to pull a Lyft in-house, really scale out their Zoox vehicles under that brand? That could be really interesting. The other area to think about is that if we are going to this kind of business models, there's going to be somewhere in the value chain where modular supplier is going to take a lot of value. So I think an area to think about is chips in the technology stack. So a company that can sell their technology and their chips to multiple OEMs. So I think Mobileye kind of played that role in the original ADAS systems, but there's WeRide, AVRide, Neuro. There's a half dozen other companies that could kind of fall into that cohort of categories. Some of them are public, some of them are private.

Starting point is 00:16:41 somebody in that area is going to, we're going to suddenly find out that there's, you know, a hundred million vehicles all powered by the same company with just different badges on them. Those are the two areas that I'm kind of looking at is that aggregation space and then the modular supplier space. It's interesting how similar this list is to what we were just talking about the AI, because what Travis was talking about there with Uber and Lyft is the same thing we were talking about with AI is who owns the customer. And I think similarly, if I I mean, my boring answer here would be Alphabet, and not because I think Waymo or Wing is definitely a slam dunk, but just the optionality of having all of those ways to win plus this versus just

Starting point is 00:17:18 betting on a pure play. If you want something kind of more exotic, I do think that this comes outside of the consumer faster than it does for the consumer. There's a lot of defense tech where definitely this is a Pentagon priority. I don't think they have to worry about all of those pesky safety regulators and transportation boards if they want to roll this out. So there's a handful of companies, none of which are undervalued right now, but are just kind of leading the way on autonomy and defense tech. I think those are the first winners here. Coming up after the break, we're going to do a lightning round of stories that we're following in the news today. New from Nespresso, blend wellness into your coffee routine with the Coffee Plus range,

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Starting point is 00:18:42 questions but remember to keep them foolish that email again is podcasts at fool.com podcasts at fool.com finishing up we're going to do a quick round table of stories that we're following what we find most interesting this week and what we'll be looking for in the next couple of months Travis, again, the guest of the week. You have honors. What did you see? Yeah, I've got to be following oil. I haven't followed oil all that much. I have a history of writing about the industry. I know enough to be dangerous, but that's really the challenge here. Oil is up about 60% this year. We're close to $100 per barrel. We've fallen over the past day or two, but this is a huge deal in the economy and that can really ripple across

Starting point is 00:19:22 all of our investments. So for the first time in quite a while, I'm waking up in the morning one of the first things I'm checking on is what's going on with the oil markets. Are traders freaking out about what's going on in the Middle East? Do they think things are over? Because if we go back to $60 a barrel, you know, it's kind of back to business as usual as it was just a few weeks ago. If we're going to $150 or $200 a barrel, there's a very, very high likelihood that a recession is coming next. I was also wanting to do something commodities related, but I didn't want to bore everyone to death with two commodity stories right in a row because I want to talk about LNG. I'll save that for next week. So I'm going to go back to the well and talk about

Starting point is 00:19:58 what I was following up from last week, where I was talking about kind of the boogeyman of private capital problems. It's been a recurring news story for, I want to say, six months to like a year now. What's the problem with capital markets or private capital? Excuse me. I feel like it's been this weird place, whether or not it's actually a thing or it's just makes great fodder for news stories. There was another one that came out this week where Aries Capital is a private equity company, private capital, they were actually limiting withdrawals to about 5% of their total AUM, which again, ties into that idea. Like, is this really a thing? And this is where I'm starting to land because there are more and more stories of limiting withdrawals in private

Starting point is 00:20:39 capital versus the stories of like, oh, you know, debt covenants are light. It's maybe more risky than people were thinking. What I'm starting to come around to the idea is, is we're seeing all these withdrawals, it reminds me a little bit, I don't want to be hyperbolic when I say this on like the Silicon Valley bank in like 2022, when we were talking about deposit runs and things like that. But there does become a point where fear becomes the driving narrative. And if there's enough people wanting to get out of private capital deals with these withdrawals and everyone's always hitting the max on their withdrawals, it eventually does become a problem in and of itself versus the actual risk in the portfolio itself. And so this has been something I think is

Starting point is 00:21:21 fascinating and could be a much bigger story in the coming weeks or months if we continue to see these things where private capital companies are trying to limit withdrawals. And it's going to be big for companies that are publicly traded companies, thinking about the Blackstones or the KKRs of the world that have these massive private capital investments. If they have to take withdrawals, there's going to be consequences. The funny thing about that is that really the withdrawal limits are a feature, not a flaw. That's what makes it all possible and it's written into the contracts. But you're spot on that whether it is or not, once the headlines start, it could become a problem, even though it's built in and that's the way it's supposed to go.

Starting point is 00:22:01 I want to look at another side of lending, and this is just something kind of watching short-term and long-term. One in three Americans now have an unsecured personal loan. That's a new record. I'm interested in this in part because the obvious maybe macro sign here is that the consumer is stretched and they have to get creative. I think that might be it. But I also can't help but wonder if this is a signal that maybe an early warning sign that the age of the credit card is diminishing. I think that there's been a lot of press about credit card rates. credit card rates have extended beyond what they were just even a decade ago. I wonder if this isn't the beginning of a long-term shift that could impact profitability at a lot of the large

Starting point is 00:22:45 banks if we as Americans just start using our credit cards less than we have in the past. It's more on my radar than anything, but I think a fascinating trend to watch. Kind of a bummer with the three of us having slightly, like, not the most exciting, most optimistic stories that we're following here. But hey, you know what? Maybe we'll come back next week. We'll try to be a little bit more optimistic. But that is all the time we have for today. Travis, Luke, thanks for sharing your thoughts. I'm going to hit the disclosure and we'll get out of here. As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or

Starting point is 00:23:18 sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to our producer, Christy Waterworth, pulling spot duty this week, and for the rest of the Motley Fool team, for Travis, Lou, and myself, thanks for listening, and we'll chat again soon.

Motley Fool Hidden Gems Investing - The Autonomy Economy is Accelerating

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