Bill Ackman Bets Big on Uber Stock. Should You Follow Him?

Bill Ackman, the founder of Pershing Square Capital Management, is known for his aggressive investment style. Often, his portfolio is dominated by a handful of names with heavy concentrations.

Right now, Ackman's hedge fund has just 14 holdings. Just five names account for more than half of the portfolio's total value. Ackman's biggest current holding is Uber Technologies (NYSE: UBER), with a portfolio weighting of nearly 13%. Last quarter, Ackman increased his Uber position by 14%, buying more than 4 million shares.

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Why is Bill Ackman so bullish on Uber stock? Should you follow him in? The answers to these questions come down to one key growth catalyst.

Here's why Ackman is so bullish on Uber stock

Perhaps the best way to understand Uber as an investment is to compare it against another ride-hailing peer: Lyft (NASDAQ: LYFT). Uber currently has a market capitalization of $154 billion. Lyft, meanwhile, is valued at just $6.3 billion. The reason for this massive valuation gap explains everything.

According to estimates, Uber has around 10 million drivers globally, whereas Lyft has more than 1 million drivers. In 2022, for comparison, Uber had just 5.4 million drivers, while Lyft had roughly 2 million.

Investors should notice right off why Uber's valuation far exceeds Lyft's. Uber now has 10 times as many drivers, doubling its driver count over the past four years. Lyft, meanwhile, has seen its driver base decline by nearly 50% over the same time period.

The long-term bull thesis for Uber goes far beyond its dominance in the traditional ride-sharing market. In reality, Uber should be viewed by investors as a high-upside competitor in the quickly emerging robotaxi market.

"Almost everyone's had experience with the service Uber and I think it's an amazing service and the stock is very cheap today because people believe that the Tesla taxi, if you will, is going to disrupt Uber," Ackman explained in a July interview.

Tesla, of course, has gone all-in on robotaxis. Many experts believe that 90% of Tesla's valuation will one day be tied to its self-driving taxi division . But Uber has been investing in robotaxis nearly as aggressively. The firm has directly invested in many EV makers, including Rivian Automotive and Lucid Group , securing tens of thousands of vehicles to scale its fleet. It has also invested hundreds of millions of dollars into autonomous driving technology, including $100 million in Atoms, its former CEO's autonomous software start-up.