It has been a rather bumpy year for electric vehicle (EV) maker Rivian (NASDAQ:RIVN). Indeed, shares of RIVN stock are down 45% year-to-date (YTD) but have been making a rather consistent move higher over the past month, with Rivian moving higher again today on some intriguing news.
Rivian recently announced that a second generation of its R1S and R1T models (an SUV and pick-up truck, respectively) will feature new designs and computing power. Notably, Rivian will be adding Nvidia (NASDAQ:NVDA) chips to its vehicles in a bid to improve performance considerably.
These performance upgrades will come at a cost, but investors are clearly appreciating this move. Rivian’s technology is among the best in the sector and this could be a compelling way to drive an even bigger perceived moat between Rivian and other key premium EV makers in the space.
Let’s dive more into what was announced — and what this means for RIVN stock investors.
RIVN Stock Higher on Chip News
Nearly every company under the sun wants to announce some sort of partnership with Nvidia. However, in the EV space — where cars are basically electronics on wheels — such announcements certainly make sense.
In order for Rivian to add the kind of computing power it needs to upgrade its vehicles, these chips appear to be necessary. Impressively, the company is only expecting to increase the price of its second-generation vehicles by $1,000, with its R1S set to start at $75,900 and its R1T starting at $69,900. That adds value EV buyers will like to see, reflecting Rivian’s willingness to keep prices in-line despite inflationary pressures on the cost side.
Rivian’s margins remain the key concern for investors and it’s unclear if enough cost savings can be found to account for these added costs. It’s also unclear right now whether Rivian will be eating most of the costs of these recent upgrade or not. But for a company looking to gain market share in a competitive space, this does seem like an attractive strategic move.
We’ll have to see how Rivian’s order backlog and other metrics look during its upcoming earnings call. But today, it appears investors are liking what they’re hearing.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
