Nvidia Stock Dips as Rivian Follows Tesla in Designing In-House Chips
The EV maker announced a next-generation autonomy processor, signaling a growing trend of vertical integration that poses a long-term challenge to Nvidia's automotive ambitions.
Nvidia shares slipped in trading Wednesday after electric vehicle maker Rivian announced it was developing its own custom silicon for autonomous driving. The move intensifies a trend of automakers bringing chip design in-house, a strategic current pioneered by Tesla that poses a new competitive challenge to Nvidia’s fast-growing automotive business.
Shares of the Santa Clara-based chip giant fell approximately 2.7% to $178.86, shedding over $100 billion in market capitalization. The drop followed Rivian's inaugural "Autonomy & AI Day," where the company unveiled its next-generation Rivian Autonomy Processor (RAP1), a custom-designed 5nm chip aimed at powering future self-driving capabilities.
Rivian's shift represents a significant strategic pivot. The company aims to control its technological roadmap, reduce costs, and optimize performance by designing its own silicon. The RAP1 chip will be the brain of its new Autonomy Compute Module (ACM3), which the company says can process 5 billion pixels per second. This hardware is being developed to support Level 4 autonomous driving and is slated to appear in the company's upcoming, lower-priced R2 vehicle line, expected to begin shipping in late 2026.
However, the transition is not an immediate break. In a crucial nuance for Nvidia, its technology remains deeply integrated into Rivian's current vehicles. The recently revamped second-generation R1T pickup and R1S SUV, which began deliveries in June 2024, utilize dual Nvidia DRIVE Orin processors. This setup provided a tenfold performance increase for the vehicles' driver-assistance systems, according to a company release. Nvidia's hardware will continue to power the hands-free driving features in the R1 models, underscoring a phased transition rather than a sudden rupture.
Even so, Rivian’s decision is a clear signal of a broader industry shift toward vertical integration, particularly in the EV sector. Automakers are increasingly viewing their software and hardware stacks as a core competency, not just a part of the supply chain. Tesla has long championed this approach, developing its own Full Self-Driving (FSD) computer, which many analysts credit for its performance and cost advantages. By designing the RAP1, Rivian is betting that it can achieve similar benefits by tailoring its hardware precisely to its software needs.
"The move to in-house chip development is seen as a significant step for Rivian to control costs and fine-tune features," noted one analyst report following the announcement. This strategy is critical as the EV market becomes more crowded and price-sensitive. Rivian is also launching an "Autonomy+" subscription for $2,500 as a one-time fee, a price point significantly lower than Tesla's offering, in a bid to drive adoption.
For Nvidia, the development is a headwind for its automotive segment, a key growth pillar for the $4.5 trillion company. While the automotive unit's revenue is still dwarfed by its Data Center and Gaming divisions, Nvidia has successfully positioned its DRIVE platforms as the go-to solution for automakers developing next-generation intelligent vehicles. The company has stated it is targeting approximately $5 billion in automotive revenue for its 2026 fiscal year. The loss of future Rivian models to an in-house design, even if the immediate revenue impact is minor, represents a significant narrative blow and could embolden other carmakers to explore their own silicon projects.
Despite the competitive pressure, Wall Street sentiment on Nvidia remains overwhelmingly positive, with 60 of 64 analysts maintaining a buy or strong buy rating, largely due to its commanding lead in the AI data center market. The company’s scale, deep R&D budget, and broad ecosystem of software and hardware present a formidable barrier to entry. Yet, the moves by Tesla and now Rivian highlight a persistent risk: as automotive clients scale, they may increasingly choose to invest in their own custom solutions rather than rely on off-the-shelf processors, turning today's partners into tomorrow's competitors.