By Gene Munster
Apple (AAPL) has confirmed an Axios report that they have acquired autonomy startup Drive.ai. Apple has hired “dozens” of Drive.ai hardware and software engineers and will receive some intellectual property and hard assets, including vehicles. Drive.ai, which has been seeking a buyer for months and recently laid off 90 engineers, was valued at over $200M in its most recent round of funding. We believe the acquisition price will be less than $35M.
M&A in the Self-driving Space To Continue
Apple continues to strategically acquire frontier tech companies. The company has the culture and the balance sheet to think and invest for the long-term, so they are able to advantageously acquire companies that cannot do the same but have talent, IP, and expertise that is valuable.
The acquisition also points to the broader trend of consolidation that we’re seeing among self-driving startups. This is evidenced by Drive.ai, once considered among the industry’s leaders, selling at a discount. We expect this trend, along with downward pressure on startup valuations, to continue as timelines to commercialization and revenue are pushed out. The dozens of companies working on autonomous transport will not all survive in the long run; however, talented engineers in the space will remain valuable, so we anticipate more acqui-hires.
Apple’s Growing Interest in Autonomy
The Drive.ai acquisition is further evidence of Apple’s persistent and growing interest in autonomy. While it is still too early to draw any conclusions, we think the most likely approach for Apple will be to license an autonomy and services stack to existing auto manufacturers. In our minds, the Drive.ai deal suggests that “Apple is still serious about autonomy” far more than it suggests that “Apple is two years away from launching a branded car.”
The transportation theme is at the very front end of significant disruption and one of only a few sectors large enough to have a measurable impact on a company the size of Apple. While Apple’s autonomy project is still five-plus years away from generating any revenue, we think the size of the opportunity and Apple’s careful positioning are being underappreciated by investors.
Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio.
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