Can Rivian make the great AI leap forward?

Investing.com -- Rivian may be well-positioned to emerge as a key player in the race toward AI-enabled autonomous driving, according to Morgan Stanley (NYSE:MS) analysts.

In a note on Thursday, the bank said it sees the company’s end-to-end technology platform as a potential strategic asset for legacy automakers.

“We see Rivian (NASDAQ:RIVN) as well positioned on scaling a fully integrated hardware/software stack needed to unlock the AI robot opportunity,” Morgan Stanley wrote, pointing to the company’s upcoming AI and Autonomy Day as a key event to watch.

They note that CEO RJ Scaringe emphasized that Rivian’s second-generation platform (AV 2.0) embedded in the R2 vehicle marks a significant evolution from the R1. 

“R2 on track for improved unit economics out of the gate,” Morgan Stanley said, highlighting “greater negotiating leverage with suppliers” and reduced bill of materials.

Rivian is said to be focused on “capturing data” through a suite that includes 55-megapixel cameras and five radars, and is conducting “offline training to help compensate for a small but growing fleet.” 

The company’s compute strategy also sets it apart, choosing to “rent GPUs… which has provided greater flexibility with chip pricing fluctuations.”

On the strategic front, Rivian’s recent partnership with Volkswagen (ETR:VOWG_p) is being closely watched as a test case for legacy OEM collaboration. “Rivian’s VW deal proves to other OEMs that they can be a strategic tech partner,” Morgan Stanley said.

However, challenges remain. “Compute is capital intensive,” said the bank and rare earth supply for magnets continues to expose “U.S. national security vulnerabilities.” 

They add that Rivian is developing “heavy rare earth-free motors” and alternate supply chains for its R2 platform.

While reiterating its Equal-Weight rating on the stock, Morgan Stanley noted that the next few months “may prove to be consequential” in determining Rivian’s role in AI-powered autonomy.