While the stock is very expensive, I'm a big fan of Tesla as a business. Why? Because it has a dominant advantage when it comes to investing in artificial intelligence (AI).
Autonomous driving technology, at least as far as consumers are concerned, hasn't lived up to the hype thus far. But according to numerous experts, artificial intelligence is rapidly supercharging self-driving technologies.
With billions already invested and billions more promised for additional innovation, few EV stocks will be able to match the scale or pace of Tesla's autonomy ambitions. Big tech firms, with their massive budgets and world-class talent pools, are arguably Tesla's biggest competitors long term.
But if I had to pick a pure-play EV stock to rival Tesla over the coming years, it would have to be Rivian Automotive (RIVN 8.11%). And there's one obvious reason why.
NASDAQ: RIVN
Key Data Points
Rivian has the best chance to replicate Tesla's success
Tesla arguably has the lead when it comes to autonomous driving for two reasons. First, it invested in AI earlier than much of the competition. Second, it controls its own means of production. That gives it a rapid ability to innovate, plus millions of real-world miles driven by real-world customers -- critical data for improving its models.
Big tech firms like Alphabet, the parent company of Google, still rely on third-party suppliers to produce the vehicles that power its Waymo self-driving taxi service. Meanwhile, other pure-play EV stocks like Lucid Group don't have any cheap vehicles in its lineup, severely limiting how many real-world miles its customers generate.
Image source: Getty Images
Right now, Rivian has one of these advantages under its belt. It also invested in AI early. Leadership expects its AI stack to become very vertically integrated, going so far as to produce its own chips.
And this year, the company expects to start shipments of its first vehicle priced under $50,000. That will give it access to tens of millions of new customers, all of whom have the potential to generate meaningful data for the company's AI models.
When it comes to investing in EV stocks, investors should target companies with a visible path toward dominating in AI. That means finding companies with clear AI investment strategies alongside the financing necessary to execute on these visions.
Additionally, look for companies that can control their own supply chain, with low-priced vehicles that can add millions of miles of real-world data for model training. Rivian may be far behind Tesla when it comes to its overall AI capabilities, but it's quickly putting the right pieces together to compete long term.
