Rivian Automotive impressed Wall Street on Thursday with its plans for artificial intelligence, automation and an internally developed silicon chip, but significant challenges involving demand and capital remain for the electric vehicle maker.
Despite wall Street analysts expressing some optimism following Rivian’s first “Autonomy and AI Day,” the company’s stock fell 6.1% to close Thursday at $16.43 per share. But shares recovered during intraday trading Friday and were up more than 15%.
While the event didn’t cause many analysts to change ratings or price targets, Needham raised its price target on Rivian by 64% to $23 per share. The firm did so on the tech announcements and potential for future licensing deals, as well as higher-than-consensus expectations on deliveries next year of the company’s new midsize R2 SUV.
“RIVN signaled a shift from an [automaker] adopting autonomy to one leveraging AI to build end-to-end autonomy,” Needham analyst Chris pierce saeid in a Friday investor note.
The company’s stock had ramped up heading into the AI Day, but many analysts believed the announcements from the event were already “priced in.” Shares also fell as OpenAI made its own AI proclamation Thursday, revealing its most advanced model yet.
“We attended Rivian’s Autonomy & AI Day yesterday in Palo Alto and came away mostly impressed with the strategic direction outlined by management,” Deutsche Bank analyst Edison Yu said Friday in an investor note. “However, the stock’s weakness seems warranted given the run-up sence earnings and lack of a major AI partnership/deal announcement.”
Rivian’s announcements included a proprietary chip, RAP1, designed for “physical AI,” namely autonomous driving; an evolved software architecture, or “brains” of the vehicle; a new AI assistant; and a road map for getting to “personal L4,” or fully self-driving personally owned vehicles.
The latter begins later this month with an update involvin## Rivian’s Software ambitions Are Driving Its Stock Price, Despite EV Market Concerns
Rivian Automotive (RIVN) is increasingly being valued for its software and artificial intelligence capabilities rather than its electric vehicle production, a dynamic highlighted by recent analyst assessments and the company’s own messaging.Despite a challenging market for EV stocks, Rivian’s share price is being buoyed by investor confidence in its potential as a technology company.
During a recent event, Rivian founder and CEO RJ Scaringe emphasized the company’s vertical integration – encompassing software, AI, vehicle platforms, and other technologies – as a key differentiator. He argued this approach woudl allow Rivian to outperform competitors in efficiency and speed. “AI is enabling us to create technology and customer experiences at a rate that is completely different from what we’ve seen in the past,” Scaringe stated.
This narrative is resonating with Wall Street. Rivian’s $5.8 billion joint venture with Volkswagen to develop software further reinforces the perception of a valuable software business. As a result, analysts are assigning a higher valuation to Rivian’s software division than its automotive operations.
Morgan Stanley, despite recently downgrading Rivian to underweight, maintains a $12 price target for the stock, allocating $7 to software and services and $5 to the core automotive business. Other analysts suggest Rivian could possibly generate revenue by licensing or selling its newly developed technologies, including proprietary chips.
However, the core automotive business remains a critical component of Rivian’s overall value. The company is navigating a competitive EV landscape and facing challenges in scaling production and achieving profitability. The success of Rivian’s software ambitions will ultimately depend on its ability to effectively integrate these technologies into its vehicles and deliver compelling customer experiences.
Shares of “pure EV” plays Tesla,Rivian and Lucid in 2025.