Waymo Is Taking Off Fast in Austin, Texas. Here's Why That's Great News for Alphabet -- and Even Better News for Uber.

Core Insights - Alphabet's stock has recently become the cheapest among the Magnificent Seven stocks, with a P/E ratio below 20, primarily due to tariff-related economic uncertainty [1] - Despite concerns that generative AI could impact Google Search, the service has maintained double-digit growth over the past year, indicating a slow potential decline in revenue [2] - Alphabet's growth is supported by other high-growth businesses, including YouTube and Google Cloud, which experienced accelerating growth last year [2] Waymo's Expansion - Waymo, Alphabet's autonomous robotaxi service, has launched in Austin, Texas, marking its fourth city, and has seen significant early success [3][4] - In its first month, Waymo in Austin logged 80% more rides than in San Francisco during the same period, suggesting strong adoption outside of tech-centric cities [4] - The partnership with Uber for the Austin launch has contributed to this success, with Waymo rides accounting for 20% of all Uber rides in the city during the last week of March [6][7] Implications for Uber - The early adoption of Waymo in Austin is beneficial for Uber, as it launched exclusively through the Uber app, enhancing demand for both services [6][10] - Uber's dual-path strategy as a demand aggregator and service provider for Waymo's fleet raises questions about the revenue potential from this partnership [9][10] - The revenue share arrangement between Waymo and Uber remains undisclosed, and it is uncertain if Waymo will eventually develop its own standalone app [11] Industry Comparisons - The Waymo/Uber partnership draws parallels to the early days of streaming services, where traditional networks benefited from selling content to platforms like Netflix [12] - Unlike Netflix, which could produce original content, Uber lacks the means to develop its own self-driving technology following its divestiture of the autonomous driving unit [14] - For Uber to compete in the long term, it may need Aurora to enhance its offerings to match Waymo's capabilities [15] Conclusion - The successful launch of Waymo in Austin represents a potential new revenue stream for Alphabet, alongside its existing businesses [16] - Alphabet's stock is currently viewed as a more attractive investment compared to Uber, given its lower valuation [16]