1 Surprising Stock Harnessing the Power of Artificial Intelligence (AI) | The Motley Fool

Artificial intelligence (AI) stocks had a great 2024. One of the industry's largest suppliers, Nvidia, is now one of the largest publicly traded companies in the world.

But not every AI stock is worth trillions of dollars. A small handful remain under the radar for most investors. And while there can be more risk investing in smaller businesses like these, the upside potential can more than make up for it.

Right now, there's one under-the-radar AI stock that every growth investor should take a look at.

Most investors don't know about this AI stock

Most investors haven't heard of Rivian (RIVN -0.44%). Those who have don't associate it with being an AI company. That's because, in large part, it's not.

The company is an electric carmaker, and most investors classify it as an EV stock. But that's the thing with AI -- over time, businesses that aren't necessarily directly related to AI today will eventually become, for all intents and purposes, fully fledged AI companies. Rivian is a prime example of this evolution.

Right now, Rivian markets two luxury EVs, both of which can cost upwards of $100,000. Starting next year, however, it expects to expand this lineup with three new mass-market vehicles: the R2, R3, and R3X. These new models are expected to debut under $50,000, meaning that millions more people will be able to afford them.

Launching mass-market vehicles that most consumers can actually afford is a huge lever of growth for start-up carmakers. But long term, a company's ability to sell cars will likely hinge on how well they've invested in AI over the years.

It seems that for decades we've been promised self-driving cars. The issue, however, is that the pace of technological innovation hasn't scaled as quickly as we thought, despite billions in global investments, including large initiatives by several big tech companies with deep pockets and long-term time horizons. It's pricey to equip a vehicle with all the radars and sensors necessary to interpret the world around it, plus plenty of software, compute power, and network bandwidth to make decisions on the fly. The advent of scalable AI technologies could upend this paradigm rapidly, and Rivian is already making moves to leverage its capabilities.

This month, Rivian released its quarterly earnings, giving management an opportunity to opine on its AI efforts. Specifically, Rivian's CEO noted how investments in AI today could bring about self-driving capabilities much faster than legacy methods. "Self-driving developed before 2021 was heavily rules-based," Rivian CEO RJ Scaringe stressed. "But now, we can use end-to-end training, using modern techniques akin to what's used in large language models and transformers. It's completely changing self-driving development and speeding it up."

In the past, Rivian vehicles used Mobileye's EyeQ chips and software, which provided advanced driver-assistance systems and limited autonomous driving features. But last August, Rivian switched to an in-house solution that, given most produce development timelines, was likely in the works for years.

In a nutshell, Rivian believes its in-house solution is much better suited for AI processing versus the Mobileye setup, which pre-processed the information from its cameras and sensors before feeding the data to the rest of Rivian's architecture. "Architecturally, that approach makes it very hard to use an AI-centric model, where you're collectively using the full perception stack, having an early fusion, using more advanced AI training techniques to collectively assess from a perception point of view, what's around you, and then using that to drive both the planning side, the path planning side, and then, of course, the controls," CEO JD Scaringe explained."

It's too early to know for sure, but Rivian clearly made some investment decisions in years past that should allow it to take advantage of an AI-centric model more quickly than it would have simply by relying on third-party suppliers like Mobileye.

One reason to buy Rivian stock today

While Rivian isn't a fully fledged AI company today, it's still currently a very exciting EV stock. The company recently posted its first ever gross profit, relieving some of the persistent capital concerns related to any EV start-up. And the company's upcoming mass-market vehicle launch should provide a strong inflection point for sales growth.

There's just one problem: This sales inflection point won't occur until late 2026, or even early 2027. That's caused the company's valuation to fall well below competitors like Lucid Group and Tesla, at least on certain metrics like the price-to-sales ratio. But this execution gap -- between today and when the sales ramp should occur -- is exactly why now is the reason to buy. If you wait until sales growth picks up, the valuation may have already lifted beyond today's bargain levels.