Tesla's stock faces significant downside risk (50-75%) if self-driving technology fails, due to extreme valuation dependence (P/E 164).

In other words, it is a blow to Tesla, which is entering this market with a camera-only approach. So, let's take a look at the details of this Waymo-Tesla dispute, and what it ultimately means for Alphabet and Tesla stock investors.

The timing was interesting, especially with Tesla preparing to hold a CyberCube event on September 3 to introduce its two-seater vehicle to its small and growing fleet of autonomous taxis.

I believe that, according to the latest count, Tesla had around 50 self-driving vehicles operating on the roads in the various cities where it conducts its tests. Some of these vehicles still have supervisors inside, while others operate without them.

One analyst who follows Tesla has stated that Waymo's arguments are flimsy. He said that Waymo had built a complex driving system, and that artificial intelligence on a large scale would render that system irrelevant, and that this falls under the discourse of established companies, which is the essence of the innovator's dilemma.

Because Tesla has very strong support from the community of individual investors and Wall Street analysts, and Tesla’s marketing machine and self-driving car technology are much more powerful compared to Waymo.

He went on to say that the integrated neural architecture that receives raw pixels and outputs routing commands directly, which is Tesla's approach to autonomy, would face the risk of black box failure.

As I mentioned earlier, Tesla has around 50 vehicles. Of course, Elon Musk has always ridiculed the use of lidar, calling it a "crutch". Instead, the company directed all its efforts toward trying to create fully autonomous cars using only cameras.

So, Tesla is known to be years behind schedule, with Elon Musk once promising a million robot taxis on the road by 2020. And of course, we could go on talking. A 45-minute video could go on talking about all the predictions Elon Musk made that didn't come true.

Of course, what this ultimately boils down to is the cost. Isn't that so? The reason Tesla has not taken the iterative approach of including lidar and radar in addition to the technologies it employs is cost.

If they do that, it will of course make it safer, but it will also add cost to every trip they offer.

But the reason companies like Waymo and Tesla are working on driverless car technology is their confidence that they can bring this product to market at a lower cost than you get today with drivers in the vehicle.

If you were to include radar and lidar, it would certainly be safer, but if its cost were similar to what is available on the market today, it is unlikely to gain a large market share.

And that's the big question mark here. Who can bring this technology to market at a much more attractive price?

In this respect, Alphabet has a significant advantage in terms of the cost of acquiring customers because Alphabet already has billions of users of its products around the world.

Isn't that so? Therefore, it can easily market its self-driving car technology service to these users, while Tesla will need to spend huge sums of money on marketing to attract customers.

On the other hand, Tesla has the manufacturing know-how and can produce these "Cyber Cab" cars at a cost that Alphabet may not be able to match.

For investors, I think it's important to remember that Tesla is trading at a forward P/E ratio of 164, while Alphabet is trading at a forward P/E ratio of 22. Tesla's valuation is eight times that of Alphabet.

It can be said that the company's success depends largely on the success of self-driving car technology. If it had sold only as a car company, its valuation would be a fraction of what it is today.

Tesla's stock would plummet by about, I don't know, 75% if it said: "You know what? We're abandoning self-driving car technology." We are not able to deliver this technology in the way we thought we would, but that's okay, investors.

Don't worry, we have robots on the way. Isn't that so? So, they might change their focus. I don't think that's very likely, but if it does, the stock price could crash by 50 or 75% because so much depends on its success in self-driving car technology.

As for Alphabet, if Waymo's success is average and does not lead to a meaningful market share, it is unlikely to have a significant impact on Alphabet's stock price. I don't think the reaction will be anywhere near the levels of negative reaction towards Tesla.

So, it remains to be seen which of these two technologies will be the inevitable winner.

But what has now been established, and what is now certain, is that Tesla’s success is largely tied to the success of self-driving car technology. From Tesla, Tesla stock investors will face a significant decline.