Tesla's Robotaxi Is Exciting, But There Is A Better Choice For Betting On Autonomous Driving

Tesla's stock is having a frenzy, but Alphabet's (GOOGL.US) stock price has barely reflected the same excitement, even as its Waymo robotaxis rapidly expands across major U.S. cities. However, despite the fact that Tesla has been considered as the biggest capital winner in this most recent autonomous driving hype, still, multiple institutions still believe Waymo is gradually gaining attention.

Waymo claims its vehicles have driven over 71 million miles without human drivers as its ride-hailing service expands nationwide. Yet Alphabet's stock lacks the market fervor Tesla enjoys. Last weekend, Tesla rolled out a competitor in Austin, deploying only a handful of vehicles—some of which malfunctioned—yet its stock soared 8.2% on Monday.

Alphabet's shares have long traded at a significant discount to its Big Tech peers, largely due to its reliance on digital advertising for revenue. Its forward P/E of 16 is a fraction of Tesla's nearly 150x—a premium largely built on investors' long-term expectations for its self-driving ambitions.

"People are underestimating Waymo in a pretty significant way while overestimating Tesla," said Samuel Rines, macro strategist at WisdomTree. He noted that Alphabet's valuation  "assigns basically zero value to Waymo even though it has the best tech, it is already operating, and it has deals with OEMs."

Investor enthusiasm for autonomous driving stems from the massive potential market. Analysts estimate global ride-hailing sales could exceed $325 billion annually by 2030, with analyst Mandeep Singh projecting up to $20 billion coming from robotaxis.

Waymo currently offers paid autonomous rides in Los Angeles, Austin, Phoenix, and San Francisco, with Atlanta being the newest metropolis. It joined its service via Uber (UBER.US) on Tuesday. Next, Waymo is expected to expand its map to Miami and Washington in 2025. Last week, Waymo applied for a permit to test in New York City.

In October last year, Waymo was valued at over $45 billion, roughly on par with Ford (F.US) and GM (GM.US). But for Alphabet, with a market cap exceeding $2 trillion, this remains a drop in the bucket.

Morgan Stanley analyst Brian Nowak wrote last week that Waymo is becoming an increasingly attractive part of Alphabet's portfolio, offering "long-term upside" for shareholders.

Rines pointed out that Tesla's sky-high valuation hinges on the rapid adoption of its self-driving service—but a key risk is that it could take years for most users to trust autonomous vehicles. Alphabet's other businesses (Search, YouTube, Google Cloud) mitigate this risk. "I'd rather own Alphabet because it has Waymo as an optional growth driver," he said.

Alphabet's stock is down 13% YTD, underperforming the Nasdaq 100's 4% gain, as investors focus on antitrust risks and its AI positioning. Tesla, despite its premium, has fallen 14% in 2025, with CEO Elon Musk's cost-cutting moves sparking consumer backlash and hurting sales.

Still, some argue Tesla holds an edge. Shawn Severson, CEO of Water Tower Research, said, "Waymo has a commercialization lead today," but Tesla's manufacturing prowess is critical for mass-producing robotaxis. He expects the market to be large enough for both to thrive.

Alphabet doesn't break out Waymo's revenue, but it disclosed over 250,000 paid weekly rides—a 5x increase YoY. Notably, CEO Sundar Pichai remarked this was perhaps the first time he'd been asked about Waymo on an earnings call, signaling growing Wall Street interest.