TOP STORY
💰 Will Volkswagen's $6B investment be enough to save struggling EV startup Rivian?

🗞️ The investing news cycle has been DOMINATED by Big Tech earnings, the US election, and Nvidia’s Q3 report, causing a pretty interesting story to fly under the radar…

🤝 On November 12, Volkswagen ($VOW3) and EV start-up / Tesla-rival Rivian ($RIVN) officially launched a $6B joint venture to “scale their electric vehicle platforms and architectures” (for context, Rivian’s market cap is only ~$10B 😮)

👨‍💼 More recently, Volkswagen named Rivian’s former Chief Commercial Officer as its North American CEO, strengthening the ties between the two car companies.

📉 With Rivian down 92% since its IPO 3 years ago, will the investment be enough to turn things around for the struggling EV start-up? Let’s find out… 😎 

🚘 What’s Going on with Rivian?

📉 Over the past 3 years, Rivian has had an incredible fall from grace. From a peak of over $100M market cap in 2021, Rivian’s current valuation is just a little over $10M.

😥 The biggest problem facing Rivian is profitability. Despite the high sticker price of the Rivian vehicles (starting at ~$70,000), Rivian actually loses money on every car it sells.

🎯 Rivian’s CEO has repeatedly told investors that the company’s “core focus is driving toward profitability,” promising a positive gross profit in Q4 with plans to reduce costs by re-tooling the factory to drive more efficiencies, re-negotiating contracts with suppliers, simplifying design, and increasing production to drive down fixed costs…

😬 But in its recent Q3 report, the problem actually got worse, with the gross loss per car rising from -$33,000 to -$39,000…

🛻 Rivian is also facing a demand problem, delivering only 10,018 vehicles in Q3, a 26% decline from Q1. To make matters worse, Trump’s transition team announced plans last week to ‘kill the Biden EV tax credit,’ which will hurt demand even further.

This is a devastating blow to Rivian’s profitability goals as the company desperately needs to increase production to spread its fixed costs (i.e. the costs of running its factory) across more vehicles.

💰 Rivian’s Cash Problem

Since Rivian doesn’t turn a profit, it has a negative cash burn - and in the words of YouTuber Wall Street Millennial, who did an awesome in-depth breakdown of Rivian:

As of Sep 30, Rivian’s cash balance was $6.7B, and with a Q3 cash burn of -$1.15B, if Rivian stayed on the same trajectory and couldn’t raise additional capital, they would be out of cash by Q1 2026.

🛟 But that was before Volkswagen’s $6B lifeline…

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TOP STORY CONTINUED
🛟 Will the Volkswagen joint venture turn things around for Rivian?

🤔 First of all, if Rivian is in such dire straights, why is Volkswagen investing in them? Well, Rivian has something Volkswagen badly needs: one of the best software systems in the industry.

😭 Volkswagon has invested billions trying to build its own software systems, but since it relies heavily on external suppliers for many of its parts, it's hard to get these systems to work well with each other, resulting in software that’s glitchy and unreliable.

⭐️ Rivian, on the other hand, has built all its software and electrical architecture from the ground up, resulting in a seamless and highly customizable architecture.

🤝 As part of the joint venture, Volkswagon receives a license to use Rivian’s software, and the new company’s “Rivian and VW Group Technology’s” focus will be on “developing electrical/electronic architecture and software for electric vehicles that each automaker will utilize.” 

🛻 Volkswagen also plans to use the technology to develop the Volkswagen Scout, which is scheduled to arrive in 2027 (and looks eerily similar to the Rivian 😅)

Despite the similarities, Rivian CEO insists that there is ‘ample space for the brands to co-exist.’

📈 The Bull Case for Rivian

As you guys know, I always like to present both sides of the story in the Buzz, and despite all the challenges facing Rivian, according to Nasdaq, the average price target among analysts is ~$15, a ~50% higher than the current stock price…

💎 So, what are some of the diamonds in the rough for the Rivian story?

• ⚙️ While production was down in Q3, Rivian says this was due to a temporary component shortage rather than a more permanent issue.

• 🚩 Many see Elon Musk’s recent political activities as a potential win for Rivian as Musk risks alienating more left-leaning customers.

• 🎯 While the gross loss per vehicle increased in Q3, Rivian’s CEO has continually re-iterated that it’s on track for positive gross profit per vehicle in Q4, which would be transformational for the company.

• 🚚 Rivians expects revenue from commercial electric vans to increase to 25% of revenue in Q4 2024 (up from ~8% last year) as it allows more customers than just Amazon to purchase its vans.

• 🛻 On March 7, Rivian unveiled the R2, a smaller, cheaper vehicle with an estimated starting price of $45,000, which is a pivotal next step for Rivian to move into the mass market. Rivian plans to begin production of the R2 in the first half of 2026.

•  🤝 Over 35% of Rivian is owned by Amazon (18%), Volkswagen (16%) and Ford (1.2%), which obviously have deep pockets and a strong incentive to not allow the company to go under.

• 💰 With a $6.7B cash reserve, 67% of Rivian’s $10B valuation is backed by its cash holdings.

🤔 My Thoughts

Truthfully, after probably around 4-5 hours diving into the story, I’m still pretty conflicted about the stock… 😅

🧐 Like the Wall Street Millennial, I’m pretty skeptical that Rivian will hit gross profitability in Q4, given its disastrous Q3…

👀 But at the same time, it took Tesla 10 years to hit a positive gross profit per vehicle following the launch of the Model S in 2012, when Tesla transitioned from niche sports cars to more mainstream EVs, so it seems possible that Rivian could follow a similar trajectory… and with its partnership with Volkswagon, Rivian got access to perhaps the most important asset it could ask for… more time ⏰

🙋‍♂️ What do you think about Rivian stock? Join the discussion on my post on Blossom!

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BIG NEWS IN BIG TECH
🤖 Amazon invests another $4B into Anthropic, OpenAI’s biggest rival

Ok, I’ll admit I wanted to do a longer write-up about this story, but I got a little carried away with Rivian x Volkswagen, so I’ll stick with just the executive summary on this one 😅

🤖 For those unfamiliar, Anthropic is the creator of Claude, a popular chatbot/LLM built using a ‘Constitutional AI’ approach, guiding the model with predefined ethical principles, compared to ChatGPT which uses ‘Reinforcement Learning from Human Feedback (RLHF)’ to align the model with human preferences through direct feedback during training.

🧑‍💻 On Oct 22, Anthropic announced its new Computer Use capability for Claude 3.5, which enables the bot to interpret what’s on a computer screen, navigate websites, and execute tasks through any software and real-time internet browsing.

💡 With that context, here’s the breakdown of the new investment:

• On Friday, Amazon announced that it will invest another $4B into Anthropic, on top of $4B already invested, bringing Anthropic’s valuation to $40B and Amazon’s total investment to $8B (and likely over ~20% ownership)

• As part of the deal, Amazon Web Services will become Anthropic’s “primary cloud and training partner.”

• AWS customers will get early access to Anthropic features, helping it boost its differentiation against rivals Microsoft Azure and Google Cloud.

• Amazon does not have a seat on Anthropic’s board.

• Google has also invested $2B in An Anthropic, with a 10% state in the company.

The main benefit of this deal is for ‘Amazon Bedrock’ a service that allows AWS customers to build generative AI applications.

🚀 Amazon has said generative AI is a “multibillion-dollar revenue run rate business that continues to grow at triple digits,” and so standing out from Microsoft and Google is a top priority.

⭐️ So far, analyst reactions have been largely positive:

📉 Amazon saw no stock movement on the news, with the stock falling 0.64% on Friday.

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Discussions this Week

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