The Autonomy Economy is Accelerating

0:20Tyler Crowe:Welcome to Motley Fool Money. I'm Tyler Crowe and today I'm joined by longtime Fool contributors Lou Whiteman and pulling spot duty today we've got Travis Hoium, 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 a LLM or anything like that, do you have a preferred one?

0:57Travis Hoium: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

1:08Lou Whiteman: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 the

1:18Tyler Crowe: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 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.

2:01Tyler Crowe: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 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.

2:34Tyler Crowe:It was at Business Insider, I think, last week. And this all comes when we assume a couple months from now, the OpenAI is planning to go public. And I'm sure there's a fair amount of listeners here interested in open AI 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 open AI, what would you need to see from open AI that would 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.

3:07Tyler Crowe:So you get to go first this week.

3:08Travis Hoium: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 sure that's the case with artificial intelligence.

3:39Travis Hoium: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.

4:18Travis Hoium: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 chat GBC, 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 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.

4:51Travis Hoium:That's exactly.

4:52Lou Whiteman: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 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.

5:33Lou Whiteman: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

5:55Tyler Crowe:with the numbers that they're putting out for an ipo valuation is approaching a trillion dollars it is pretty astounding because it has to be yeah and doing so while somehow not quite figured out the monetization strategy is is quite astounding and reading the tea leaves between the three it's it's no secret i think we're all a little dubious about open ai compared to you know what's going on at least from a product perspective compared to claw gemini what else 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 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.

6:49Tyler Crowe:And six months from now, a new AI model from any of these companies could come out and blow everything else out of the water. With that in mind, you as investors looking at 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?

7:09Lou Whiteman:So if we are moving towards commoditized models, and I think at least for the generalists, we are moving towards kind of commoditized models. 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. But OpenAI ramping from zero, that's a much harder game to play. 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.

7:49Lou Whiteman:And it seems like the established players are the best able to profit from it, at least for now.

7:54Travis Hoium:Yeah, these big direct AI plays. I'm largely staying away. I own shares of Alphabet. That's one of my bigger positions. But that's 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. But the way that I'm thinking about this largely is that historically, we go through hype cycles. So we go through this.

8:22Travis Hoium: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 burst or something happens. And the economics don't kind of live up to that. So then high valuations that we typically put on these kind of companies come back to reality. And that's when you get to what's called the trough of disillusionment. 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 is the companies, the banking companies or the solid companies that survived the Great Recession?

8:53Travis Hoium: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.

9:10Tyler Crowe:Yeah, it's a great kind of takeaway message when you think about patient long-term investing. We always think about it as 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.

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10:43Tyler Crowe: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 back doing like a breakdown of the holy 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.

11:14Tyler Crowe: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 robotaxis it wants to put on the road. It's working in Austin. I think the Bay Area is 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.

11:53Tyler Crowe: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 most? Lou, I want to start with you.

12:14Lou Whiteman:So this is a terrible day to ask me this question, Tyler, because last night I was late for a dinner our 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.

12:26Travis Hoium:Talk about first world problems, Lou.

12:28Lou Whiteman: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 as not trailing. And we're still in that phase where if you are making progress, you're still in the game. 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.

13:05Lou Whiteman:Kidding aside, I'm very excited about Waymo and Zox and the Robitoxies that are out there. I'm less excited about serve robotics and delivery bots. I don't know what to think about wing drone delivery, but I think it's there. 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. This is the year, whatever. But incremental is how this is going to happen. And as I said, it is 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.

13:44Lou Whiteman:It's definitely we're making progress, but I don't know if we should really be expecting a payoff anytime soon.

13:51Travis Hoium: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 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, Maymobility.

14:25Travis Hoium: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, 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 gonna own transportation demand forever. I think with this many suppliers, that's not gonna be the case. So do these other companies have a sustainable business model?

15:00Travis Hoium:And that's where I think as investors, 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.

15:37Travis Hoium:And that's exciting.

15:38Tyler Crowe:I think this sets it up really well because 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 rideshare 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.

15:58Travis Hoium:The aggregators of demand would be the way that I would...

16:00Tyler Crowe: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 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?

16:31Travis Hoium: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 a ton of demand. Do they want to pull a Lyft in-house, really scale out their Zoox vehicles under that brand?

17:03Travis Hoium: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 a 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 category. Some of them are public, some of them are private.