Waymo; the company formerly known as the Google Self-Driving Car project, is potentially the world’s most valuable Unicorn.
Morgan Stanley valued the Alphabet (NASDAQ: GOOG) subsidiary at $175 billion Forbes reported. Impressively, Waymo achieved that value making no money from its autonomous vehicles.
If Morgan Stanley’s analysts are correct, Waymo is now the world’s most valuable pre initial-public offering (IPO) company or unicorn. Waymo’s estimated value now exceeds that of the wealthiest known unicorn, Alibaba (NASDAQ: BABA) spin-off Ant Financial. Ant Financial had an estimated value of $150 billion in April 2018, CNBC reported.
Waymo’s valuation is impressive because it has no known customers. Ant Financial’s Alipay digital wallet has 400 million estimated users, mostly in China.
Alphabet’s Operating System for Self-Driving Vehicles
Such valuations definitely justify Waymo’s business plan of providing the operating systems for other companies’ autonomous vehicles. That includes Peterbilt semi-tractors in Atlanta, Chrysler Pacific Minivans in Phoenix, and Jaguar IPaces in Arizona.
A huge advantage is to this plan is that the manufacturing is left to the companies that specialize in it. A great benefit is that Chrysler Fiat (NYSE: FCAU), Tata Motors (NYSE: TTM), and PACCAR (NASDAQ: PCAR) take most of the risks. Tata owns Jaguar and Peterbilt is a PACCAR subsidiary.
Waymo avoids the expense of building a factory and setting up dealerships, and all the trouble of dealing with the United Auto Workers (UAW). Companies with existing factories, supply chains, dealerships and union contracts take the risks.
Nor will Waymo have to go to all the trouble of finding uses or markets for autonomous vehicles. It provides the basic technology for whatever uses are out there.
Waymo is the Android of Autonomous Vehicles
That business plan worked well for Alphabet (NASDAQ: GOOGL) at Android. Android is now the world’s largest software platform with over two billion users.
Android got that popular by operating in a decentralized, under the radar manor. It attracted little attention and grew. Alphabet’s plan at Waymo is to build an Android for self-driving vehicles.
Just as Android is an operating system for smartphones and other wireless devices. Waymo will be the operating system for autonomous vehicles.
Is Waymo Undervalued at $175 Billion?
If Waymo’s business plan succeeds, it will be worth far more than the $175 billion price Morgan Stanley gave it.
Waymo’s value is potentially vast, because the number of potential uses for its technology is infinite. Uses for Waymo’s operating system that exist right now include passenger cars, robo taxis, shuttle vans, semi-tractors, ridesharing vehicles, and delivery vans. Potential uses include ambulances, police cars, garbage trucks, firetrucks, food trucks, bookmobiles, and tow trucks.
An even bigger market would be self-driving tractors of all sorts. Self-driving farm tractors, lawn mowers, tractors to move baggage and planes at airports, and warehouse tractors would be logical uses for Waymo’s operating system.
Another lucrative application is operating systems for earthmoving machines like power shovels and bulldozers. Such machines would have uses in mining, excavation, logging, demolition, and construction.
An even more popular use for Waymo technology might be forklifts. Since almost every warehouse, factory, and big retail store deploys forklifts, the potential market for them is unlimited.
Interestingly, Waymo technology might have applications far beyond automobiles, tractors, and heavy equipment. Trains, drones, aircraft, Hyperloop, boats, ships, and many other vehicles can utilize the operating system.
The potential market for Waymo’s software is vast. Alphabet might just have the next Android on its hands at Waymo.
NVIDIA’s Growth Shows that Waymo’s Valuation is for Real
Investors that want to cash in on Waymo’s growth would be well-advised to buy NVIDIA (NASDAQ: NVDA). NVIDIA builds the processors that systems like Waymo operate upon and it is already selling computers to car manufacturers.
NVIDIA’s revenues more than doubled in the past two years, rising from $5.439 billion in July 2016 to $10.98 billion in April 2018. To add icing to the cake, NVIDIA paid a 15¢ a share dividend on May 23, 2018 and delivered 14 years of dividend growth.
NVIDIA’s growth demonstrates that Morgan Stanley’s Waymo valuation is realistic. This Alphabet subsidiary is now the world’s most valuable unicorn and potentially the dominating force in autonomous vehicles.
Investors that want to cash in on Waymo should buy NVIDIA now. Waymo’s operating system will require processors, NVIDIA is building those processors.