RIVN Stock Alert: Rivian adds Nvidia chips to R1 vehicles

It was a pretty bumpy year for electric vehicles (EV) Manufacturer Rivian (NASDAQ:RIVN). In fact, RIVN shares are down 45% year-to-date, but have shown a fairly steady uptrend over the past month, and Rivian gained again today on the back of some interesting news.

Rivian recently announced that the second generation of its R1S and R1T models (an SUV and a pickup truck, respectively) will feature new designs and computing power. In particular, Rivian will add NVIDIA (NASDAQ:NVDA) chips in its vehicles to significantly increase performance.

These performance upgrades come at a price, but investors clearly appreciate this move. Rivian’s technology is among the best in the industry and this could be a compelling way to create an even larger perceived gap between Rivian and other major premium EV makers in the space.

Let’s take a closer look at what was announced – and what it means for RIVN stock investors.

RIVN shares rise after chip news

Almost every company under the sun wants to announce a partnership with Nvidia. But in the electric vehicle space—where cars are basically electronics on wheels—such announcements make perfect sense.

For Rivian to provide the computing power it needs to upgrade its vehicles, these chips seem necessary. Impressively, the company is only anticipating a $1,000 price increase for its second-generation vehicles. The R1S is expected to start at $75,900 and the R1T at $69,900. That’s an added value that EV buyers will be happy to see, and reflects Rivian’s willingness to keep prices in check despite inflationary pressures on the cost side.

Rivian’s margins remain the primary concern for investors, and it’s unclear whether enough cost savings can be achieved to offset these additional costs. It’s also currently unclear whether or not Rivian will bear the majority of the costs of these recent upgrades. But for a company looking to gain market share in a competitive environment, this seems like an attractive strategic move.

We’ll have to wait and see how Rivian’s backlog and other metrics play out during the upcoming earnings call, but today it seems like investors like what they’re hearing.

As of the publication date, Chris MacDonald did not hold (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s disclosure policies.