Rivian’s AI push attracts investors but still can’t escape its profitability problem

Rivian Automotive showcased its plans for artificial intelligence and self-driving technology on Thursday, drawing interest from investors even as the electric vehicle company faces tough questions about sales and money.

The stock had a rough day Thursday, dropping 6.1% to finish at $16.43 per share. But things turned around Friday, with shares climbing more than 15% during trading hours.

Most Wall Street experts kept their ratings the same after Rivian held its first “Autonomy and AI Day” event. However, Needham bumped up its price target by 64% to $23 per share, citing the technology reveals and possible future deals where Rivian could license its systems to others. The firm also expects stronger sales next year when the company launches its 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 wrote Friday.

“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 wrote Friday. “However, the stock’s weakness seems warranted given the run-up since earnings and lack of a major AI partnership/deal announcement.”

Company unveils custom chip and self-driving plans

At the event, Rivian unveiled several new technologies. These included RAP1, a custom chip built for “physical AI” and self-driving features, along with updated software that acts as the vehicle’s brain, a new AI helper, and a plan for reaching “personal L4″—meaning cars that can drive themselves completely.

The rollout starts later this month with improvements to the hands-free driving system. Rivian plans to keep adding features until vehicles can drive fully on their own in the coming years. The company didn’t say exactly when full self-driving or a robotaxi service might arrive.

Before the event, Rivian shares had jumped more than 30% to $17.50. Even with those gains, the stock remains far below its IPO price of $78 per share in 2021.

Barclays analyst Dan Levy and others said the technology announcements, including the surprise chip reveal, looked good, but Rivian still needs to prove itself in difficult market conditions.

“With RIVN facing a tougher path to breakeven on core vehicle sales alone, we believe with enhanced AV/AI capabilities, RIVN is further paving the path to additional software/service revenues, which would be margin accretive,” Levy wrote Friday. “To be clear, there is certainly a ‘show me’ element for RIVN on its capabilities.”

The company faces several obstacles. Electric vehicle sales have slumped since tax credits worth up to $7,500 ended in September. Support from the Trump administration appears limited, and Rivian has internal problems with products and funding.

Several analysts pointed out that even Tesla, the top EV seller in America, struggles with low adoption of advanced driving features. Rivian is playing catch-up to competitors who have offered such systems for years.

Rivian founder and CEO RJ Scaringe defended the company’s approach, saying building everything in-house, like software, AI, vehicle platforms, and other technology, will make the automaker faster and better than rivals.

“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 said at the event.

This strategy, plus Rivian’s $5.8 billion software partnership with Volkswagen previously reported by Cyptopolitan, has led Wall Street to value Rivian’s software business more than its car manufacturing operation.

Software business valued higher than car sales

Morgan Stanley, which recently downgraded the company, has a $12 price target that breaks down to $7 for software and services and $5 for making and selling vehicles. Some analysts think Rivian could license or sell its new technologies, including chips.

“RIVN is developing a suite of hardware and software offerings to remain competitive in an Auto 2.0 world. However, several risks remain around demand, potentially limiting data capture needed to reach higher levels of autonomy,” Morgan Stanley’s Andrew Percoco wrote Friday, according to CNBC.

Morgan Stanley kept its rating based on concerns about slow adoption of self-driving features, weak EV demand before the R2 launch next year, and a long road to making money.

RBC Capital Markets analyst Tom Narayan agreed: “The advancements enhance Rivian’s product offering but do not address ongoing concerns around liquidity and R2/R3 profitability.”

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