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Rivian Automotive (RIVN) unveiled its in-house AI chip RAP1 to power autonomous driving. The chip cuts supplier costs by 40% per vehicle.
Rivian shares surged 16% after Needham upgraded its price target from $14 to $23.
The company burns $2B annually and delivered only 41,500 to 43,500 units in 2025.
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Rivian Automotive (NASDAQ:RIVN) held its first Autonomy and AI Day conference yesterday, unveiling its inaugural in-house AI chip, the Rivian Autonomy Processor (RAP1). This custom silicon, a 5-nanometer chip with 1,600 sparse TOPS of inference power, marks Rivian’s shift toward vertical integration in autonomous driving tech. It positions the company to compete directly with Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Tesla (NASDAQ:TSLA), unofficially earning it status as an “AI stock.”
Initial market reaction was tepid, with shares dropping 6% yesterday over concerns about execution timelines. But Wall Street quickly reassessed its position, and shares are shooting up 16% in noon trading as analysts highlighted the strategic pivot.
Rivian’s RAP1 chip is no mere add-on; it’s the core of a redesigned autonomy stack aimed at accelerating self-driving capabilities. Integrated into the third-generation Autonomy Compute Module (ACM3), the chip processes data from an expanded sensor suite: 11 cameras totaling 65 megapixels, five radars, and a new LiDAR unit for precise 3D mapping.
This setup enables “Universal Hands-Free” driving across 3.5 million miles of North American roads, covering most marked U.S. highways. Early 2026 will see over-the-air updates rolling out to second-generation R1 vehicles, adding features like automatic lane changes on command and co-steering for smoother urban maneuvers.
The chip’s importance to Rivian cannot be overstated. Previously reliant on Nvidia hardware, Rivian now controls its AI pipeline, slashing dependency on external suppliers and cutting costs by an estimated 40% per vehicle.
With 205 gigabytes per second of memory bandwidth, RAP1 handles vision-centric AI workloads — crucial for Rivian’s Large Driving Model (LDM), a foundational AI trained on real and simulated data using Group-Relative Policy Optimization. This mirrors large language models but focuses on driving strategies, targeting Level 4 autonomy by late 2026.
For a company burning cash on EV production, this tech opens recurring revenue through the Autonomy+ subscription: $2,500 upfront or $49.99 monthly, undercutting Tesla’s Full Self-Driving at $99 monthly. It transforms vehicles into upgradable platforms, boosting margins as software eclipses hardware sales.
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Needham & Co. wasted no time endorsing Rivian’s ambitions, upgrading its price target this morning from $14 to $23 per share while reiterating a Buy rating. Analyst Chris Pierce praised the Autonomy and AI Day as a “confidence booster,” noting how in-house silicon and AI integration position Rivian ahead of legacy automakers.
“The event increased our confidence in Rivian’s positioning as software- and AI-defined vehicles become industry table stakes,” Pierce wrote. He emphasized vertical integration’s edge: faster iterations on driver interfaces and autonomy, fostering a “durable competitive advantage” through fleet data loops that refine AI in real time.
Pierce’s note aligns with Rivian’s broader narrative. With R2 SUV production slated for early 2026 at a $45,000 price point, the chip enables LiDAR-equipped models from launch, expanding the addressable market to mass consumers. Needham sees software revenue hitting $500 million annually by 2027, offsetting EV market headwinds like expired tax credits.
This upgrade implies 40% upside from the stock’s intraday levels, signaling Wall Street warming up toward Rivian as a tech contender, not just an EV upstart.
Rivian’s AI leap is intriguing, but hardly a silver bullet for dominance in EVs or AI. Tesla’s decade-long data moat and Nvidia’s ecosystem dwarf Rivian’s nascent efforts; Level 4 autonomy remains years away, plagued by regulatory scrutiny and unproven scalability.
EV sales dipped 14% through the third quarter amid softening demand, with 2025 deliveries guided at just 41,500 to 43,500 units — below 2024 levels. Cash burn persists at $2 billion annually, and R2 ramp-up risks delays that could strain liquidity despite Volkswagen’s $5.8 billion joint venture.
Investors should temper their enthusiasm. While Autonomy+ promises fatter margins, adoption hinges on trust in untested tech. Rivian trades at 4x forward sales, a premium for a firm still unprofitable. This AI pivot buys it time, but without flawless execution, it’s not a buy signal yet.
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