This Overlooked AI Trade Has Been Quietly Outperforming Nvidia Over the Last 6 Months

Nvidia remains a top pick for artificial intelligence (AI)-focused investors. The GPU stock is, quite simply, an AI powerhouse. Nvidia sits at the center of the AI revolution, making shares a must for nearly every portfolio seeking exposure to this cutting-edge field. Wall Street analysts still expect a lot of growth ahead for Nvidia. But the company's $4.8 trillion valuation may cap how quickly it can grow from here.

Investors seeking greater growth potential should consider smaller AI stocks. Right now, there's a relatively tiny EV stock attempting to go all-in on AI. Most investors don't realize how much this electric car maker is betting on AI. And over the last six months, this company's stock has actually outperformed Nvidia shares.

This EV stock is actually an AI stock

On the surface, Rivian Automotive (NASDAQ: RIVN) looks like an EV stock. And it is. Nearly all of the company's revenue comes from electric vehicle sales. And nearly all of the company's growth this year should be fueled by rising sales for its R2 SUV -- Rivian's first EV priced under $50,000.

Dive a little deeper, however, and you'll realize that Rivian's future heavily relies on AI. In fact, the company is investing so heavily in artificial intelligence that it no longer expects to reach profitability in 2027.

Image source: Getty Images.

Rivian's AI bets center around self-driving technology. Artificial intelligence has emerged as a key enabler of autonomous vehicles due to its ability to turn variable, complex, real-time data sets into actionable decisions.

Tesla is also investing aggressively in AI. The company believes AI and autonomy are key to its long-term growth ambitions, whether that is through selling cars to consumers who demand full self-driving capabilities or through robotaxis, an emerging industry that some experts see as worth $10 trillion over the long term.

Unlike Tesla, Rivian doesn't seem prepared to enter the robotaxi market directly. But it is looking to sell to robotaxi operators that lack their own vehicle manufacturing capabilities. Uber Technologies, for example, recently ordered up to 50,000 R2 SUVs from Rivian in a $1.25 billion deal. Those vehicles are intended for use in Uber's robotaxi fleet.

"We believe autonomy will be a key fundamental long-term differentiator for our business," Rivian's CFO stressed earlier this year. It's hard to disagree. If vehicles are fully autonomous by 2031 as a growing number of experts believe, carmakers that lack full autonomy will quickly fall behind in terms of consumer demand and robotaxi potential.

It will take time for Rivian to be viewed by the market as an AI stock. But the company is putting its money where its mouth is, securing social validation from deep-pocketed industry players like Uber. For now, Rivian's market value remains under $25 billion. From a sheer size perspective, Rivian stock has more raw upside potential than Nvidia due to that company's gargantuan size.

Rivian's small size could begin to balloon once R2 deliveries begin scaling in a meaningful way. Higher R2 sales would likely improve margins, freeing more funds to accelerate AI investments. Five years from now, if full autonomy is achieved, I expect Rivian to be viewed as a bona fide AI stock, similar to how Tesla is viewed by the market today.

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.