Why Warby Parker Stock Raced 16% Higher on AI News Tuesday

Many investors were seeing vast potential in Warby Parker (NYSE: WRBY) on Tuesday. Collectively, they bid the eyeglass specialist's share price up by 16% on the day, thanks to news of its tie-up with a top name in the tech sector. That performance was particularly impressive, given that the S&P 500 (SNPINDEX: ^GSPC) ended up in the red, falling 0.4% during the trading session.

AI-powered vision

That tech company is none other than Google owner Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL). Warby Parker revealed in a press release that it is teaming with Google to develop a line of advanced eyeglasses that harness artificial intelligence (AI) technology. These products would be suitable for everyday use.

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Warby Parker and Google intend to launch the first of these products after this year. In the press release, the former company did not get more specific.

As for the business arrangement between the pair, Google is committing up to $75 million to cover its partner's development and commercialization expenses. It's also pledged to a direct investment into Warby Parker, again of up to $75 million. The latter is contingent upon Warby Parker's option, and the achievement of certain, unspecified collaboration milestones.

A hopeful view of the future

It's exciting that Warby Parker has teamed with a tech behemoth like Google, especially considering Alphabet's eager pursuit of -- and financial commitment to -- developing useful and potentially groundbreaking new technology. A possible cash infusion of as much as $150 million is quite the sweetener, too.

While details are lacking for this project at the moment, it's indisputably a boon for the eyeglass maker. Investors are right to be hot on the stock following this news.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Warby Parker. The Motley Fool has a disclosure policy.