Tesla’s ambitious plan to revolutionize the transportation industry with its Robotaxi autonomous vehicle fleet is generating significant excitement among investors. However, the company’s CEO, Elon Musk, may be facing stiff competition from other major technology players, including billionaire hedge fund manager Bill Ackman.

Step 1: Alphabet is Rivaling Tesla in the Autonomous Vehicle Market

Ackman’s hedge fund, Pershing Square Capital Management, has been quietly building a position in Alphabet (GOOGL 1.70%). The company’s dominance in internet search via Google could be threatened by the rise of ChatGPT and other large language models (LLMs). Nevertheless, Ackman sees Alphabet as a leading player in the AI space, with the ability to integrate new services across its ecosystem – from advertising, cloud computing, cybersecurity, workplace productivity, internet search, and more.

One area that receives virtually no attention pertaining to Alphabet’s AI ambitions is autonomous driving.

However, Alphabet has been quietly building an impressive autonomous vehicle operation of its own called Waymo. Today, Waymo taxis are already serving customers in major metropolitan areas, including Phoenix, San Francisco, Los Angeles, and Austin.

Step 2: Robotaxis could Revolutionize Uber’s Business

Earlier this year, Ackman took to social media platform X (formerly Twitter) in which he revealed that Pershing Square took a position in ride-hailing leader Uber Technologies (UBER -0.47%). Ackman’s investment thesis around Uber primarily revolved around the company’s valuation relative to its growth profile. However, there is a more subtle tailwind that could accelerate its growth as well. According to Pershing Square’s annual investor presentation from February, autonomous vehicle developers may choose to partner with taxi operations, such as Uber, due to the company’s existing base of 170 million customers worldwide.

Uber’s value proposition is that it already has an enormous, sticky base of consumers that autonomous vehicle businesses wouldn’t need to try and acquire themselves.

In addition, Pershing Square’s stance is that as autonomous vehicle fleets scale and become more mainstream, this dynamic provides an opportunity for the entire rideshare market to expand as well.

Step 3: Hertz could be the Missing Piece to Ackman’s Autonomous Vehicle Vision

Just a few days ago, Ackman took to X again to reveal Pershing Square’s latest big move: building a position in car rental stock Hertz (HTZ -4.10%). Ackman provided a long list of detailed financial analyses in his post and made the case for why he thinks Hertz is trading for a great value.

However, there was a sentence in the last paragraph of the post that really caught my eye.

Ackman wrote, “What if Uber partnered with Hertz on an AV [autonomous vehicle] fleet rollout over time?”

Such an idea could make a ton of sense. By merging car rentals, ride-hailing, and autonomous vehicle technology, Hertz could transform into a robotaxi operation of its own.

Instead of relying on foot traffic for its services at airports and other venues, Hertz could rent self-driving cars (perhaps from Waymo) on the Uber app.

As a result, Hertz removes the variability of the middleman (human drivers) but still benefits from a consistent flow of renters via Uber’s installed base.

In turn, Hertz could unlock steadier revenue streams and improve its unit economics on its existing vehicle infrastructure.

Ackman Could be Triangulating an AI Trade for the Ages

Admittedly, the idea of a three-way partnership between Alphabet (Waymo), Uber, and Hertz might seem like a pipe dream. However, Ackman is an activist investor – often working with a company’s executive leadership to identify ways to improve profitability and scale the overall operation.