90% of Amazon's Portfolio Is Invested in This EV Stock (Hint: It's Not Tesla)

Amazon (NASDAQ: AMZN) has an impeccable track record. The e-commerce specialist leads several industries, generates consistent revenue, earnings, and cash flow, and has delivered market-crushing returns over the long run. But can the company's stock portfolio perform nearly as well? If it does, it may be because of its largest current holding, Rivian (NASDAQ: RIVN), an electric vehicle (EV) maker. A little over 90% of Amazon's public equity portfolio is in this single stock. Should investors also be bullish on Rivian?

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A long-standing partnership

In February 2019, Rivian announced a $700 million investment round led by Amazon. That was more than two and a half years before the EV company went public. What was Amazon's reason behind this move? The e-commerce leader has a massive logistics network, including a fleet of vehicles and delivery drivers. By using EVs for transport and deliveries, the company might reduce fuel (and other) expenses.

That's why it made sense for Amazon to help fund a company like Rivian capable of providing the EVs it needs. Rivian has done exactly that. Amazon now has over 30,000 electric delivery vans on the road, provided to it by its partner. The cloud computing specialist plans to get to at least 100,000 by 2030. Amazon now owns roughly 158.36 million shares of Rivian, making it one of its largest shareholders.

The retail investing angle

Investing in Rivian might have made sense for Amazon, but would it also be a good move for average retail investors? On the one hand, there are good reasons to be bullish on the stock. Rivian's first-quarter financial results were pretty strong. The company's revenue increased by 11% year over year to $1.4 billion. That was despite a slowdown in the EV market in the U.S. during the first quarter.

Further, Rivian is launching its new model, the R2. This is especially important since the R2 is a mass-market model with a much more approachable starting price than its previous vehicles. Rivian is looking to make a dent in the large midsize SUV space. Tesla's (NASDAQ: TSLA) Model Y competes in this niche, and it has been the world's best-selling vehicle (EV or not) over the past few years. That's the act Rivian is trying to follow. If it can, expect the company's revenue to soar.

Then there is Rivian's attempt to reach level 4 self-driving (when cars can drive themselves with no human intervention). The company made a deal with Uber Technologies (NYSE: UBER) to provide the ride-hailing giant with a fleet of self-driving robotaxis to be rolled out in various cities starting in 2028. If Rivian meets the timeline outlined in this deal, it could secure up to $1.25 billion in investments from Uber. Just as important, Rivian might establish itself as a leader in the autonomous vehicle market and secure deals with other corporations. That's the bull case for the company, one that could lead to excellent returns if it materializes.

However, Rivian's shares have declined by 13% this year for a reason: Despite massive upside potential, the stock carries significant risks. The recent slowdown in the EV market may affect the company's launch of the R2, for instance. And although it was able to escape it during the first quarter, it did so because it sold a higher mix of commercial vans during that period, as it continues to fulfill its long-term contract with Amazon. These vans carry a lower average unit price and could eventually squeeze the company's margins.

That's why the R2 is so important, and if its launch flops -- perhaps because of recent weakness in the industry -- Rivian will be in trouble. Further, the company might fail to achieve full self-driving capabilities. That would put its deal with Uber in jeopardy. All these factors (and others) are worth considering before initiating a position in Rivian. My view is that the stock could be a great pick for contrarian investors who are comfortable with volatility -- and there will be plenty of that regardless of which way the stock moves. But risk-averse investors should look elsewhere.

Prosper Junior Bakiny has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.