Rivian’s AI, autonomy impresses but not enough to offset EV concerns

Rivian’s Ambitious Plans for Artificial Intelligence and Autonomy

Rivian, the electric vehicle manufacturer, recently hosted its first “Autonomy and AI Day” in Palo Alto, California, where CEO RJ Scaringe unveiled the company’s plans for artificial intelligence, automation, and a proprietary silicon chip. Despite the impressive announcements, the company’s stock fell 6.1% to close at $16.43 per share on the day of the event. However, shares recovered the following day, closing at $18.42, up 12.1%.

The event showcased Rivian’s strategic direction, including the development of a proprietary chip, RAP1, designed for “physical AI,” namely autonomous driving. The company also introduced an evolved software architecture, a new AI assistant, and a roadmap for achieving “personal L4,” or fully self-driving personally owned vehicles. While the announcements were well-received by analysts, many noted that the company still faces significant challenges, including slumping EV demand and internal struggles with products and capital.

Analysts’ Reactions and Concerns

Needham analyst Chris Pierce raised his price target on Rivian by 64% to $23 per share, citing the company’s tech announcements and potential for future licensing deals. However, other analysts, such as Deutsche Bank’s Edison Yu, noted that the stock’s weakness was warranted given the run-up since earnings and lack of a major AI partnership or deal announcement. Barclays analyst Dan Levy expressed concerns about Rivian’s ability to achieve profitability, stating that the company remains a “show me” story amid more challenging market conditions.

Morgan Stanley analyst Andrew Percoco also raised concerns about autonomy adoption rates, lackluster EV demand, and a prolonged path to profitability. RBC Capital Markets analyst Tom Narayan agreed, stating that the advancements enhance Rivian’s product offering but do not address ongoing concerns around liquidity and R2/R3 profitability. Despite these concerns, Rivian’s founder and CEO RJ Scaringe argued that the company’s vertical integration of in-house capabilities will enable it to be more efficient, quicker, and better than others.

Rivian’s Roadmap to Success

Rivian’s roadmap to achieving fully autonomous vehicles begins with an update to its hands-free driving system later this month, followed by plans to continue expanding capabilities until vehicles reach full autonomy in the years ahead. The company’s R2 midsize SUV, expected to launch next year with a starting price of $45,000, is crucial for Rivian’s success, as it is anticipated to broaden the company’s customer base and be a proof-point for its efforts regarding profitability and cost savings.

With a market cap of $22.5 billion, Rivian’s shares are rated hold with a $15.43 per share price target, according to average ratings and estimates compiled by FactSet. As the company continues to navigate the challenges of the EV market, its ability to execute on its ambitious plans for artificial intelligence and autonomy will be closely watched by investors and analysts alike.