Alphabet to Team With More Automakers on Self-Driving Technology
In May, Alphabet (GOOGL) - Get Report made headlines when it said that it will partner with car maker Fiat Chrysler to develop self-driving vehicles.
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Although not as exciting and flashy as Tesla Motors' big reveals, the collaboration nonetheless caught the attention of analysts and investors eager for profits from this game-changing technology.
Now would-be self-driving car owners and investors have more news to follow: Alphabet has said that it plans to team up with additional car makers to develop the technology.
The Fiat Chrysler team-up is expected to yield 100 self-driving 2017 Chrysler Pacifica Hybrid minivans for Alphabet, Google's parent, to test. This would more than double the company's fleet of test vehicles.
Alphabet already owns a garage full of tech-equipped sport utility vehicles made by Lexus, Toyota Motor's (TM) - Get Report luxury arm.
During a conference call Thursday, Alphabet's chief financial officer, Ruth Porat, said, "We're pleased to be working with [Fiat Chrysler], more than doubling the number of cars we're having. We do expect we'll work with many partners in this area."
Alphabet's self-driving technology is more important to the company than might be expected.
The company was created last year in order to separate Google's core business from what the company refers to as "moonshot" bets. For the most part, these moonshots are gambles on disruptive technology, such as self-driving cars.
But if these risky and expensive projects succeed, the profits could be amazing.
Alphabet has already taken a hit from some of the less successful moonshots, especially a foray into Google Fiber, its high-speed Internet attempt. In the last quarter, those losses equaled nearly $860 million.
Google's operating profits of $7 billion soundly covered those hits, but the profit potential from self-driving car technology is nearly limitless.
Alphabet's stock is on the march Friday, following the release of second-quarter earnings that beat estimates. Profits increased by as much as 24% and revenue rose by 21%, spurred on by Google's lucrative advertising business.
Alphabet is a great stock to own, and shares should be grabbed on any dips, though not right now, with the stock up more than 3% on Friday.
Instead, Toyota itself is another enticing play on this theme.
It wouldn't be a surprise to learn that the company intends to continue to collaborate with the Japanese car maker. After all, Toyota is in talks to purchase Boston Dynamics, one of Alphabet's most famous moonshot projects.
Although relatively late to the self-driving car game, Toyota intends to make this technology a large part of its company.
Japan has a disproportionately large senior population clamoring for technology that will grant them the continued independence of driving a car. And investors stand to profit from a massive roll-out of Toyota self-driving vehicles, with or without more assistance from Alphabet.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.