Increasing lidar exposure
Increasing to an old name and adding a new angle
I've been a long-term bull for LiDAR companies, which I've written out about multiple times (Lidar Q1 2025 landscape, Innoviz deep dives - three parts).
Today I'm increasing my exposure in a new way: I'll be increasing my position in Lidar companies but split across Innoviz and opening a new small position in Hesai.
Coming into 2025 my thesis has been that this is finally the year of inflection for autonomous driving in general and lidar as part of the stack. As we approach the midpoint of the year, the thesis has been playing out and I’m slowly (Very very slowly) increasing my exposure.
Innoviz has had an interesting few months and despite its highly volatile trading since writing about it last time, I've avoided adding to it. This is mainly due to the general market swings during March - May where I opted to deploy cash into other names.
Q1 was solid for Innoviz and the fundamentals in the industry and company in general are improving.
The main improvements have been:
Increasing signs that they are emerging as a leader in western lidar providers. There’s finally an uptick in activity in vehicle programs and urgency in the overall industry, mainly in L2 plus and L4 but even a few first L3 programs that are finally being developed.
The news that they are the provider of choice for NVIDIA's Hyperion platform is very big, and a strong signal. I believe that after many months of procrastination in deciding how to go about L3 post Cruise shut down, GM is finally partnering with NVIDIA and most likely in my mind NVIDIA's Hyperion platform. This means a large win for Innoviz most likely.
Tempering my bullishness is the volatility of the stock which usually offers better entry points, the need for the company to raise capital around Q4 25 or Q1 26, and the slow pace of the industry in general.
I’m diversifying my bet on lidar by putting part of my position into the actual key leader in the space both by value and by maturity which is Hesai, the Chinese competitor.
Hesai is forecasting to ship between 1.2 or 1.4 million units, 2 orders of magnitude above any competitor. The Chinese OEMs are growing globally and with the recent price cuts in China most likely as well. Hesai is the leader in their suppliers.
Hesai seems to clear play to this, and should benefit as they increase volume over the next several years, increase penetration, both in China and globally with OEMs. They’re also a leader in manufacturing which should bring down costs and increase their financial returns.
I am not a big fan of owning Chinese companies outright due to the nature of their governance and listing. Owning Hesai requires owning an ADR which doesn't actually give any governance rights, and in general I'm skeptical of long-term ownership in Chinese companies due to the problematic regulatory framework in China. However Hesai is the clear leader in the space and this offers a well balanced diversification and alternative bet on the theme I believe in.
Following the position increase 4% of my portfolio will be allocated to the lidar bet - I’m sure that over the coming 12 months I’ll be able to increase the stake when companies sell off.