Why Shares of Pony AI Blasted 70% Higher This Week

Since last Friday, shares of Pony AI (NASDAQ: PONY), a China-based autonomous vehicle company, have blasted over 70% higher, as of 1:38 p.m. ET Thursday. The company recently rolled out its seventh-generation autonomous driving system at the auto show in Shanghai.

A more integrated and cheaper autonomous vehicle

Investors are clearly impressed by Pony AI's robotaxis, which are backed by Toyota. Management claims Pony's vehicles are 20% to 30% cheaper to make than those built by the U.S.-based Waymo. Pony also said it had cut its production costs on the vehicles by 70% from its previous generation, and that its self-driving systems are very safe.

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"The safety requirements for [Level 4] systems inherently surpass those of human drivers, which we believe is unattainable through merely imitating human behavior," Pony AI's chief technology officer, Tiancheng Lou, said in a statement. "Our proprietary PonyWorld generates realistic scenarios, conducts high-fidelity simulations, and establishes behavior evaluation benchmarks to make our autonomous decision-making go beyond human capability. Building on this advanced technology, our seventh-generation autonomous driving system not only makes [Level 4] autonomous driving possible but also ensures scalability at a manageable cost."

CEO James Peng told the South China Morning Post that the new autonomous systems are more integrated than those made by Waymo and benefit from China's "... mature supply chain and ecosystem ..." Peng also said that mass production of the new vehicles will begin this year and scale up to 50,000 units by 2028.

The company is exciting but still in its early stages

Pony AI generated about $75 million of revenue in 2024, while also turning in a loss of about $275 million. With a $2.5 billion market cap, that means it trades at a massive valuation.

Obviously, investors are focused on the future, and the opportunity could be enormous. But early-stage companies like this can be very volatile, so if you are interested in investing, I would start with a small position and gradually accumulate shares as the company hits more milestones and reaches financial maturity.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.