2 Stocks That Could Soar, Driven by Billions From Software Innovations. Hint: They Aren't Even Tech Stocks.

Rivian’s software business is already proving high-margin potential: Q1 software & services revenue rose 49% to $473M while software segment gross profit reached $181M versus $62M for automotive. Volkswagen’s funding for Rivian totals up to $5.8B, with $1.3B paid at late-2024 launch plus subsequent $1.0B tranches tied to milestones. General Motors is also leaning into software monetization, with OnStar/Super Cruise realized revenue of $2.7B and deferred revenue of $5.4B last year, projected to rise to $3.1B realized and $7.5B deferred this year; management targets margins that could approach ~70% gross margin for the connected business. Overall, the article argues software-driven economics could lift automaker valuation narratives, particularly for GM and Rivian.

Analysis

The real market mechanism here is not “cars become software,” it is that OEMs with a large installed base can turn a one-time sale into a multi-year annuity, which should eventually lower perceived earnings cyclicality and justify a higher multiple. GM is the cleaner expression because the monetization lever is distribution-heavy: if bundled trials keep converting, the software line can start to matter to valuation before it fully matters to GAAP earnings.

Rivian’s value proposition is different: the Volkswagen relationship is less about near-term margin and more about external validation that its architecture has standalone value. That creates a second-order benefit for Rivian’s balance sheet — less existential dilution risk if milestone funding continues — but it also raises the bar for execution, because the equity story can quickly revert to “partner-funded survival” if the software stack does not become reusable across multiple OEMs.

The consensus may be overpricing gross-margin optics and underpricing churn. High software margin is irrelevant if adoption saturates after the bundled period, if safety/regulatory issues slow feature rollout, or if competitors turn similar features into commodity options. The key falsifiers over the next 1-3 quarters are GM renewal/attach-rate decay, flat deferred revenue growth, or any sign that VW funding is bridge capital rather than the start of repeatable licensing economics.

Key Decisions for Investors

• Long GM / short LCID for 3-6 months: GM has a monetizable installed base, trial-driven conversion, and much lower financing risk; LCID lacks the scale to prove software can offset hardware losses. Use a 10-15% relative-return target and exit if GM software metrics decelerate.
• Buy GM on pullbacks ahead of the next earnings print as a quality-upgrade trade; the market should reward deferred revenue growth before it rewards headline EPS. Falsify if renewal/attach rates slip or management trims software guidance.
• RIVN is a tactical long only, preferably via 6-9 month call spreads after weakness rather than outright equity. Upside comes from continued VW milestone funding and platform reuse; downside is rapid dilution if the partner relationship becomes a one-off financing crutch.
• No direct trade in VWAGY yet; keep it on watch as an optionality name. It only becomes interesting if management shows that Rivian-derived software can scale across multiple brands with visible recurring revenue.