Why did the BrainChip share price crash 30% in June?

BrainChip's shares were sold off in June. Here's why…

| More on:
A man in a suit face palms at the downturn happening with shares today.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The BrainChip Holdings Ltd (ASX: BRN) share price had a disappointing month in June.

The semiconductor company's shares ended the month 30% lower than where they started it.

This was despite BrainChip's shares being added to the illustrious ASX 200 index during the month.

What happened to the BrainChip share price?

Investors were selling down the BrainChip share price in June amid broad market weakness. With interest rates increasing to combat rising inflation, this put pressure on equities.

This was particularly the case at the higher risk side of the market, where BrainChip certainly sits.

For example, even after June's decline, the company has a market capitalisation of over $1.4 billion despite its revenue year to date being just $205,000.

When annualised to $820,000, this means its shares are changing hands for a ridiculous 1700 times revenue. And this is before the company has even proven that it has a market for its Akida neuromorphic processor.

In light of this, it is no surprise that when the market wobbles, the BrainChip share price tumbles.

What's next?

The next 12 months will be very interesting for the BrainChip share price. With the company now commercialising its technology, it will have to let its sales do the talking rather than its press releases or podcasts.

Which may not be as easy as many first thought. Especially given that some of the hyped-up partnerships from the last 2-3 years appear to have amounted to nothing.

For example, its partnership with NASA was big news back in 2020 and is still talked about today as a reason to invest in BrainChip. But this seems to have ended after just three weeks on 18 January 2021 based on NASA data. It's also worth noting that there was no mention of NASA in its most recent annual report.

So, should sales fail to materialise in a market dominated by some huge tech behemoths such as AMD, Intel, and Nvidia, then there's a distinct danger that its days as a billion dollar plus company could be numbered.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Technology Shares

DroneShield shares sink 7% despite big news

Let's see what's going on with this market darling on Thursday.

Read more »

A man activates an arrow shooting up into a cloud sign on his iPad.
Technology Shares

Up 25% since April, is it too late to buy Xero shares today?

A leading expert gives his verdict on the growth outlook for Xero shares.

Read more »

Man looking at digital holograms of graphs, charts, and data.
Technology Shares

2 amazing ASX tech shares I wish I'd bought last year

These tech companies are among the world’s best companies.

Read more »

A man in a business suit and tie places three wooden blocks with the numbers 1, 2, and 3 on them on top of each other.
Broker Notes

3 reasons to buy this booming ASX All Ords tech stock today

A leading broker forecasts more gains to come from this surging ASX All Ords tech stock.

Read more »

Man ponders a receipt as he looks at his laptop.
Technology Shares

Brokers rerate 3 leading ASX 200 tech stocks

Experts reveal their ratings on the ASX 200 tech sector's three biggest companies.

Read more »

Hologram of a man next to a human robot, symbolising artificial intelligence.
AI Stocks

Why Macquarie forecasts a big rebound for these 2 quality ASX All Ords tech stocks

Macquarie expects a big rebound is coming for these AI linked, ASX All Ords tech stocks.

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

Is it too late to buy DroneShield shares?

This high-flying stock is up 90% since this time last month. Where next? Let's find out.

Read more »

A frustrated male investor frowns with his hands and arms open asking why the share price has dropped today.
Technology Shares

Why this high-flying ASX 200 tech stock just got downgraded

Let's see which stock has been hit with a downgrade today.

Read more »