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

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 Friday to close at $18.42, up 12.1%

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 said 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 announcement 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 since 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 involving its hands-free driving system, followed by plans to continue to expand capabilities until vehicles reach full autonomy in the years ahead. Rivian did not disclose a time frame for the full autonomy or potential robotaxi fleet autonomous vehicles.

Leading up to the event, Rivian shares were up more than 30% to $17.50. Despite those gains, shares remain well off the levels of the company’s IPO of $78 per share in 2021.

Barclays analyst Dan Levy and others said while Rivian’s technology announcements, including the surprise proprietary chip, were impressive, the company remains a “show me” story amid more challenging 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 said Friday in an investor note. “To be clear, there is certainly a ‘show…