Alphabet's autonomous vehicle business is progressing rapidly, but its stock price struggles to enjoy Tesla-like euphoria
Waymo, a subsidiary of Alphabet, is rapidly expanding its self-driving taxi services in major cities across the United States, but its stock price has not reflected the optimism, falling far short of Tesla's market heat. Despite Waymo's advanced technology and partnerships with several automakers, the market still underestimates its value. Analysts point out that the potential for the self-driving taxi market is enormous, with sales expected to exceed $325 billion by 2030
According to Zhitong Finance APP, the enthusiasm for the autonomous vehicle sector continues to heat up. However, despite its Waymo autonomous taxi service rapidly expanding in major U.S. cities, Alphabet (GOOGL.US) stock price has hardly reflected this optimism. In contrast, Tesla (TSLA.US) is clearly more "favored," as evidenced by an 8.2% surge in a single day triggered by a malfunction demonstration vehicle in Austin last weekend, making it the biggest capital winner in this autonomous driving concept frenzy. Nevertheless, several institutions still believe Waymo is gradually attracting attention.
Waymo claims that as its ride-hailing service expands across the U.S., its vehicles have driven over 71 million miles without human drivers. However, Alphabet's stock price lacks the market heat enjoyed by Tesla. Last weekend, Tesla launched a competing product in Austin, and despite deploying only a small number of vehicles and experiencing some malfunctions, its stock price surged 8.2% on Monday.
For a long time, Alphabet's stock price has been significantly discounted compared to its larger tech peers due to its revenue primarily relying on digital advertising. However, its expected price-to-earnings ratio of 16 times is merely a fraction of Tesla's nearly 150 times ratio—the latter's high valuation is largely based on investors' long-term expectations for its autonomous driving services.
Samuel Rines, a macro strategist at WisdomTree, stated, "The market severely underestimates Waymo while overestimating Tesla." He pointed out that Alphabet's valuation "hardly assigns any value to Waymo, despite its advanced technology, operational status, and partnerships with several OEMs."
Investor enthusiasm for autonomous driving technology stems from the potential scale of the market. According to Bloomberg Intelligence, global ride-hailing service annual sales could exceed $325 billion by 2030. Analyst Mandeep Singh stated in a research report on Monday that up to $20 billion of this could come from autonomous taxis.
Waymo currently offers paid autonomous ride-hailing services in Los Angeles, Austin, Phoenix, and San Francisco, and plans to operate in Atlanta through the Uber (UBER.US) platform later this year, expanding to Miami and Washington next year. Last week, Waymo applied for a permit to test vehicles in New York City, leading to a decline in Uber and Lyft (LYFT.US) stock prices.
In October last year, Waymo was valued at over $45 billion, roughly equivalent to the market capitalizations of Ford Motor Company (F.US) and General Motors (GM.US). However, for Alphabet, which has a market capitalization exceeding $2 trillion, this is still just a drop in the bucket.
Morgan Stanley analyst Brian Nowak wrote in a research report last week that Waymo is becoming an increasingly attractive part of Alphabet's portfolio and should provide shareholders with "long-term upside potential." Lai Yins pointed out that Tesla's high valuation relies on the rapid adoption of its autonomous driving services, but there is a risk: it may take years for most users to gradually adapt to using self-driving cars. In contrast, other businesses of Alphabet (including search, YouTube, and Google Cloud) mitigate this risk. Lai Yins stated, "I would prefer to buy Alphabet because it has Waymo as a potential growth point."
Alphabet's stock price has fallen 13% this year, underperforming the 4% increase in the Nasdaq 100 index. Investors are more concerned about other issues, including potential antitrust risks and the company's position in the field of artificial intelligence. Despite Tesla's stock price being at a premium, it has dropped 14% so far in 2025, as CEO Elon Musk's efforts to cut government spending in the U.S. have triggered a consumer backlash, affecting sales.
Of course, some believe that Tesla has a favorable position in the autonomous driving field. Shawn Severson, CEO of Water Tower Research, stated, "Waymo currently has an advantage in commercialization," but Tesla's manufacturing capability is crucial for mass-producing self-driving taxis. However, he expects the market size to be large enough for both companies to thrive.
Alphabet has not disclosed Waymo's revenue separately, but the company stated in its recent earnings call that its weekly paid passenger trips exceed 250,000, a fivefold increase from a year ago. Notably, CEO Sundar Pichai mentioned that this might be the first time he was asked about Waymo in an earnings call, indicating growing interest from Wall Street.
Andrew Choi, a portfolio manager at Parnassus Investments, believes that Waymo's actual value is far higher than what the current stock price reflects, while Tesla's high valuation carries a lot of risks related to autonomous driving.
"The two are actually not comparable," Choi stated, "one is already operational, with impressive scale expansion and has started charging; the other is still in development and has been for many years."
JP Morgan pointed out that driven by strong momentum in the field of artificial intelligence, Asian tech stocks could rise another 15%-20% this year. Analysts including Gokul Hariharan wrote in a report: "The growth in data center capital expenditures in 2025, along with stronger confidence in growth for 2026, will continue to drive AI to lead this upward cycle. In the next three months, we do not recommend significantly withdrawing from AI stocks, but rather prefer to stick with the winners."
