Shares of Luminar Technologies (NASDAQ: LAZR) jumped as much as 17.9% in trading on Tuesday after news broke that the Biden administration proposed new restrictions on Russian and Chinese vehicle software. Shares are up 15.4% near the close of the trading day.
New protections in the auto business
The U.S. Department of Commerce has proposed banning vehicle software that comes from China or Russia, as well as the hardware that could enable autonomous driving. This could put protections around not only the U.S. auto industry, but also the software that enables autonomous driving.
There's an arms race going on in autonomous driving, and Chinese companies, in particular, are aggressively improving their capabilities. But security and economic concerns have caused the U.S., Canada, and Europe to all implement hefty tariffs on Chinese vehicles, and that may now extend to software.
Will Luminar Technologies be saved?
While this could potentially be good for U.S. self-driving companies, it's not clear if Luminar will be one of them. The company is not generating significant revenue, and losses are piling up for the company.
LAZR Revenue (TTM) data by YCharts
Investors hoped that a boom in autonomous driving could turn around the company's financials, but falling costs for LiDAR and an uncertain addressable market as new technologies develop may lead to less revenue and profit than previously expected.
While a ban on foreign technology would be an incremental positive, it would also likely reduce the total addressable market for Luminar's products, and with these weak financials, that's not good news for the stock long term.
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Travis Hoium 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.
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