Gene Munster, Managing Partner at Deepwater Asset Management, projects that Alphabet Inc GOOGL GOOGL will spin out its autonomous driving unit Waymo within the next 2-4 years, potentially reaching a valuation between $350 billion and $850 billion by 2030.

What Happened: In a detailed research note, Munster and analyst Brian Baker suggest the spinoff could add 12-28% to Alphabet’s current market capitalization, depending on the parent company’s ownership stake, which they estimate is currently around 70%.

“Today, Waymo alone is too small for Alphabet investors to care about,” Munster wrote. “However, the management team is sharing more about their rapid progress, plans to expand operations, and has raised additional outside capital.”

The analysis comes as Waymo continues to expand its autonomous ride-hailing service, now operating in Phoenix, San Francisco, and Los Angeles, with Austin launching later this year. The company currently provides over 150,000 rides weekly across its 700-vehicle fleet.

Munster’s valuation model hinges on Waymo’s potential market share in the U.S. ride-sharing industry by 2030. In the most optimistic scenario, capturing 70% market share could generate $28 billion in earnings and an $850 billion valuation. A more conservative 30% market share scenario suggests an $11 billion earnings potential and $337 billion valuation.

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Why It Matters: The report highlights that despite high upfront vehicle costs of approximately $200,000 per unit, removing human drivers could save about $82,000 annually per vehicle. Munster expects vehicle costs to decrease to around $100,000 to make the long-term economics viable.

Waymo recently raised $5.6 billion in a Series D funding round led by Alphabet, with participation from major investors including Andreessen Horowitz and Fidelity, valuing the company at approximately $45 billion. The funding suggests growing institutional confidence in Waymo’s autonomous driving technology and business model.

Munster predicts the autonomous ride-sharing market will primarily be contested between Waymo and Tesla Inc TSLA, with the first company to achieve widespread autonomy likely to capture the majority share.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.