Alphabet Inc: This Trigger Could Send Google Stock Surging

Google StockNew Tailwinds for Google Stock

Although we usually think of Alphabet Inc (NASDAQ:GOOG) as a sprawling business, 99% of the company’s revenues are advertising-related. Google stock (GOOG) is almost entirely concentrated in this one sector, but that could change very soon.

After years of research and development, Google is finally ready to package its self-driving program into an actual business. This would mean spinning the driverless project out of “Google X,” the experimental lab where the company tests out new ideas, into a newly formed entity. (Source: “Google’s self-driving car team is hiring executives as it prepares to spin out from Alphabet’s X,” Recode, December 7, 2016.)

If you ever wondered why Google reorganized itself into Alphabet, wonder no more.

These kinds of transitions are exactly why. In the founding letter, Google founder Larry Page wrote: “Alphabet is mostly a collection of companies. The largest of which, of course, is Google.”

By Page’s telling, Google’s moonshot ideas would eventually outgrow the company, so the company needed room for them to breathe. Under the new structure, they could evolve into full companies and have their own chief executive officers, all of whom would still report to Page.

This is what we think is happening for the driverless car project.

The first rumblings came from the head of the project himself, John Krafcik, when he spoke at the Nikkei Innovation Forum in October. Krafcik was vague about the timeline, but he made it clear that driverless cars were going to “graduate” from Google X’s lab.

Now we’re seeing conspicuous hires to the driverless car team. For instance, Kevin Vosen was hired as the project’s chief legal officer. To the layperson, this hiring looks harmless. But Google X already has lawyers. The new hire, skilled as he may be, is a duplicate that makes no sense.

That is, unless self-driving cars will become a new company under the Alphabet banner. Other recent additions to the Google workforce also seem redundant. Why else would they hire a second “head of real estate” if not to make sure that the new division was staffed properly?

Only one answer explains all of the above: Google’s autonomous car division is almost open for business.

Existing carmakers like Fiat Chrysler Automobiles NV (NYSE:FCAU) have signed deals to license the driverless tech from Google, which is a clever way for Google to ride the autonomous car trend without the heavy costs of vehicle production.

Moreover, the market seems ignorant of its effect on Google stock (GOOG). Investors still believe that self-driving cars are 20 or 30 years down the road, but the writing on the wall says otherwise.

If driverless cars truly graduate from Google X, it’s because Alphabet executives expect it to make a lot of money. With this potential growth not priced into Google stock (GOOG), I expect there to be enormous returns waiting for the patient tech investor.