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When most investors think about robotaxis, they probably think of Waymo and Tesla (TSLA).
And that makes sense.
Alphabet’s (GOOGL) Waymo is already providing hundreds of thousands of autonomous rides every week, while Tesla is betting heavily on Cybercab and its own autonomous-driving technology.
But there’s another company that deserves to be right in the middle of the conversation: Uber (UBER).
I know that might sound strange. Uber built its business around millions of human drivers. If cars can eventually drive themselves, wouldn’t that be terrible news for the company?
That’s been one of the bear cases against Uber for years. But after watching what the company has been doing recently, I’m beginning to think investors have it backward.
Uber tried the expensive route first. It spent years developing its own autonomous-driving technology before selling that business to Aurora Innovation (AUR) in 2020. Rather than continue fighting a technological arms race against Waymo, Tesla, and other well-funded competitors, Uber changed its strategy.
Instead of trying to beat them, Uber decided to work with them.
The list has become impressive. Uber now has autonomous-vehicle relationships involving Waymo, Pony.ai (PONY), WeRide (WRD), Wayve, Nuro, Lucid (LCID), Stellantis (STLA), Nvidia (NVDA), Volkswagen’s MOIA, Momenta, Autobrains, and others.
It’s also expanded beyond cars through partnerships such as the one announced this week with autonomous drone-delivery company Zipline.
And these aren’t all science experiments. Waymo vehicles already operate through Uber in Austin and Atlanta.
Pony.ai and Uber recently expanded their relationship with plans to deploy more than 2,000 robotaxis in Europe.
Uber, Wayve, and Stellantis are working on a Level 4 robotaxi program where Stellantis provides the vehicles, Wayve provides the autonomous technology, and Uber provides the marketplace.
One of my favorite examples is Nuro. Uber plans to deploy at least 20,000 Lucid vehicles equipped with Nuro’s Level 4 autonomous-driving system over six years, with the first commercial launch targeted for the San Francisco Bay Area later this year.
Put all these deals together and Uber’s strategy becomes pretty clear.
Nobody knows which company will ultimately develop the best autonomous-driving technology. Waymo has an early lead in the United States. Tesla believes its approach will eventually allow it to scale faster and cheaper. Meanwhile, Nuro, Wayve, Pony.ai, WeRide, and others are spending billions trying to solve the same problem.
Uber doesn’t necessarily have to pick the winner. It can work with several of them.
I think that’s the part of the story Wall Street may be underestimating. Rather than making one enormous technological bet, Uber is attempting to become the marketplace where autonomous vehicles from different companies connect with riders. It’s essentially becoming the Switzerland of the robotaxi industry.
And Uber already has something every robotaxi company eventually needs: customers.
The company has more than 200 million monthly active platform consumers and has spent more than 15 years training us to pull out our phones, press a button, and expect a vehicle to show up.
Uber also understands pricing, routing, payments, matching supply with demand, customer service, insurance, and operating across markets around the world. None of that is as exciting as watching a car drive around San Francisco without anyone behind the wheel. But if robotaxis eventually scale to tens of millions of rides, that infrastructure becomes incredibly valuable.
We’ve learned this repeatedly during the internet era. Having the best technology isn’t always enough. Distribution matters. Customers matter. Scale matters.
Uber already has all three.
Now I’ll go out on a limb.
I believe Uber is a takeover target and that potential buyer could be Alphabet.
To be clear, I haven’t seen anything suggesting a transaction is currently being negotiated. This is my prediction based on where I think the industry is heading. Combining Waymo with Uber could give Alphabet a powerful answer to Tesla’s vertically integrated robotaxi strategy.
There’s logic behind the idea. Waymo was valued at $126 billion following a $16 billion financing round earlier this year and continues expanding into new cities. Alphabet has arguably the most advanced commercial autonomous-driving operation in the United States.
What Waymo doesn’t have is Uber’s distribution.
Combining the two would bring together leading autonomous-driving technology with the world’s largest ride-hailing platform. Alphabet would immediately gain Uber’s global customer base, mobility network, and infrastructure rather than building that distribution city by city.
Of course, there are some obvious obstacles. A deal would face intense regulatory scrutiny, Alphabet doesn’t need to own Uber to work with it, and Uber’s neutral position could become less valuable if one AV competitor suddenly owned the platform.
But I still believe the combination makes enough strategic sense to put it on my radar.
More importantly, my investment thesis doesn’t depend on Alphabet buying Uber.
Uber is profitable, generating substantial free cash flow, and still growing. At the same time, management has quietly positioned the company at the center of an autonomous-vehicle ecosystem that includes many of the industry’s leading players.
For years, investors worried robotaxis would eventually eliminate Uber’s reason for existing. I disagree.
Uber doesn’t need to win the autonomous-driving race. It just needs the winners of that race to need Uber.
Judging by the number of companies already lining up to put their autonomous vehicles on Uber’s platform, that’s exactly what’s happening.
