The technology sector advanced 614% during the last decade, while the broader S&P 500 (^GSPC -0.12%) advanced 195%. Technology stocks are primed to maintain their momentum during the next decade as innovations like electric vertical take-off and landing aircraft (air taxis), autonomous robots, and robotaxis hit the market.
With that in mind, several hedge fund billionaires bought shares of Amazon (AMZN -0.99%), Archer Aviation (ACHR -5.57%), and/or Joby Aviation (JOBY -1.90%) in the first quarter. A few examples are detailed below:
- Israel Englander of Millennium Management added to his stake in Amazon, now his fourth largest holding, excluding options contracts.
- Paul Tudor Jones of Tudor Investment added shares of Archer Aviation and started a small position in Joby Aviation.
- David Shaw of D.E. Shaw & Co. added to his stake in Archer Aviation, but it remains a very small position.
- Ken Griffin of Citadel Advisors added to his stake in Joby Aviation, but it remains a very small position.
Here’s how these companies are shaping the future of technology.
Image source: Getty Images.
Amazon: Autonomous robots and robotaxis
Amazon supports its retail business with a vast logistics network, which includes more than 1 million robots that sort, pick, and carry packages to streamline order fulfillment. The company recently designed a generative artificial intelligence (AI) model called DeepFleet that will make its robots more efficient by improving their ability to move through warehouses.
Additionally, Amazon is developing software for humanoid robots that could assist or even replace delivery drivers, according to The Information. The company initially plans to partner robots with human drivers in electric Rivian vans, where human drivers will handle navigation and robots will carry packages to doorsteps. But Amazon could eventually automate the entire process by pairing robots with robotaxis.
Amazon’s autonomous driving subsidiary Zoox is developing robotaxis. The company plans to introduce a commercial ride-hailing service in Las Vegas in late 2025, with San Francisco to follow in 2026. Zoox is also testing robotaxis in Austin, Los Angeles, Miami, and Seattle. Robotaxis are a large opportunity for Amazon, not only because they could reduce delivery costs, but also because the ride-hailing market is forecast to grow at 21% annually to reach $918 billion by 2033, according to Straits Research.
Morgan Stanley analyst Brian Nowak estimates costs related to fulfillment, shipping, and last-mile logistics consume 36% of revenue from Amazon’s retail business. The company could materially improve its profit margins by automating portions of those workflows with robots and robotaxis. In a recent note to clients, Nowak called Amazon “one of the companies best positioned to deliver material financial return from physical AI and robotics” in the next few years.
Of course, investors need to consider the entire business — not just its autonomous driving and robotics divisions — when making a decision. But Amazon has a strong presence in three growing industries, and Wall Street estimates its earnings will increase at 18% annually over the next three to five years. That makes the current valuation of 37 times earnings look tolerable. Patient investors should feel comfortable buying a small position today.
Archer and Joby: Electric vertical take-off and landing (eVTOL) aircraft
Joby and Archer develop electric vertical take-off and landing (eVTOL) aircraft, which combine quiet electric motors with the ability to hover, take off, and land vertically like a helicopter. eVTOL aircraft promise to revolutionize urban mobility in the years ahead, replacing hour-long car commutes through congested city streets with faster air taxi trips.
Joby says it was the first eVTOL manufacturer to complete three of the five stages of the Federal Aviation Administration’s (FAA) type certification process, which paves the way for aircraft to begin commercial flights. Yet Joby is targeting its first commercial launch in the United Arab Emirates (UAE) early next year, followed by U.S. cities shortly thereafter. But Archer plans to start commercial flights in the UAE later this year, followed by the U.S. (starting with Los Angeles) as early as 2026.
One key difference is that Archer sources more components from aerospace suppliers with parts already used in certified aircraft, which limits upfront costs and increases the odds of regulatory approval. “Our strategy is to create the most streamlined path to market, starting with sourcing 80% of our vehicle’s major components and subsystems through suppliers with a proven track record of FAA certification,” said CEO Adam Goldstein.
Alternatively, Joby is more vertically integrated, meaning it develops most components and systems internally. Doing so affords the company greater control over its supply chain, but also increases the upfront costs and may be a headwind to FAA certification.
Battery cells are a good example. Aviation Week reports, “While Archer is using more commonly produced cylindrical battery cells, Joby is relying on pouch cells that are more novel and likely harder to certify.”
Importantly, neither Joby nor Archer currently earn revenue, which means it’s very difficult to value the stocks. But Wall Street analysts see Archer as the best bet right now. Its target price of $13 per share implies no change from its current share price of $13. But Joby’s target price of $8 per share implies 56% downside from its current share price of $18.20.
Here’s the big picture: Joby currently has a market value of $14 billion, and Archer is valued at $7 billion. I think both companies could be worth much more in the future.
The urban air mobility market is forecast to grow at 35% annually to top $29 billion by 2030. However, investors shouldn’t buy these stocks unless they’re comfortable with extreme volatility and have a very long time horizon.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
