Billionaire Israel Englander Just Reduced Millennium's Stake in Rivian by 95% and Scooped Up This Other Cathie Wood Favorite EV Stock Instead

Israel "Izzy" Englander is a billionaire hedge fund manager and serves as chairman and CEO of Millennium Management. During the third quarter, Millennium made some curious moves among electric vehicle (EV) stocks -- yet surprisingly, I'm not talking about Tesla.

According to Millennium's latest 13F filing, Englander and his team trimmed the fund's stake in Rivian Automotive (NASDAQ: RIVN) by 95% -- selling about 4.6 million shares during the September-ended quarter. At the same time, Millennium initiated a position in electric vehicle takeoff and landing (eVTOL) manufacturer Archer Aviation (NYSE: ACHR). Of note, outspoken technology investor Cathie Wood has been a supporter of Archer and holds the stock across her exchange-traded funds (ETFs).

Let's dig into what may have influenced these decisions and assess if swapping Rivian for Archer makes sense right now.

Why sell Rivian stock right now?

For the last few years, Rivian's storyline has echoed that of Tesla during its early days. Similar to its larger cohort, Rivian's production and delivery trends ebb and flow pretty dramatically over each passing quarter. While I can't fault Rivian's management for trying, it just seems like each manufacturing upgrade or cost-cutting effort that's put into place serves more as a Band-Aid for a short-term problem rather than a sustainable solution for long-term gains.

This dynamic has precluded Rivian from reaching a point that allows it to scale its production output in a profitable manner. The best way to actually see what I mean by this is to look at the company's gross profit per delivered vehicle.

Image source: Rivian investor relations.

In the table above, you can see that Rivian's unit economics are backward -- and they aren't showing any signs of improvement. For the quarter ended Sept. 30, Rivian lost $39,130 on each car it delivered. Some investors may give Rivian a slight pass in this regard due to the company introducing some new EV models, which obviously come at a steep cost. But I can't buy into that notion just yet. Per the trends outlined above, Rivian's current gross profit per vehicle is at its lowest point of all of 2024.

In my eyes, the only way to turn the ship around is to really ratchet up demand -- and I think Rivian might have some problems trying to do that, too. Why? Well, consider that President-elect Donald Trump is rumored to be considering scaling back EV tax credits as part of the Inflation Reduction Act.

Given that EVs are already expensive to purchase, removing or reducing tax credits to buy them disincentivizes consumers. Such a move could be a major headwind for Rivian as the company continues to fall behind Tesla.

Image source: Getty Images.

Why buy Archer stock right now?

During the third quarter, Millennium scooped up 3,247,428 shares of eVTOL maker Archer Aviation. Now, before I explore the ins and outs of Archer, you're probably thinking what in the world is eVTOL? In simple terms, Archer is building electric air taxis.

One of the more interesting applications for these flying EVs is helping reduce traffic in heavily congested environments, particularly in big cities. The U.S. military has even expressed interest in Archer's products given the low noise emittance from EVs -- a major plus during stealth operations.

Although Archer remains pre-revenue, the company's purchase order book sits at over $6 billion -- boasting demand from the likes of United Airlines, Airforce Work Project, Future Flight Global, and many more.

From my perspective, there are two glaring drawbacks with Archer. First, shares have soared by 54% so far in 2024. While its market capitalization of $4.1 billion may seem reasonable given the value of the company's purchase orders, I remain skeptical of Archer's prospects until it begins commercializing its flying taxis. Until I start seeing Archer's vehicles out in the world, I can't help but see the company as a highly speculative -- albeit intriguing -- investment choice.

While it's entirely possible that Millennium believes Archer is an interesting alternative to traditional options in the broader EV landscape, I think it's more likely that the company views an investment in the stock as a compelling risk-reward opportunity and was willing to take a minor position. With all of that said, keep in mind that Millennium is a large fund and its Archer position comprises less than 0.1% of the entire portfolio.

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Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.