The BrainChip Holdings Ltd (ASX: BRN) share price is having a tough day.
In early trade, the semiconductor company's shares are down 8% to 92 cents.
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Why is the BrainChip share price sinking?
The BrainChip share price is under pressure on Wednesday amid a broad market selloff.
This follows a particularly poor night on Wall Street, which saw the tech-focused NASDAQ index crash 5.2% lower.
Investors were selling down US stocks overnight after the latest US inflation reading came in hot when the market was betting on it cooling. This has sparked fears that the US Federal Reserve will have to aggressively increases interest rates to tame inflation.
CNBC reports:
The report is one of the last the Fed will see ahead of their Sept. 20-21 meeting, where the central bank is expected to deliver its third consecutive 0.75 percentage point interest rate hike to tamp down inflation. The unexpectedly high August report could lead the Fed to continue its aggressive hikes longer than some investors anticipated.
This would not be good news for tech shares such as BrainChip. The higher that interest rates go, the more they squash the valuations of growth stocks.
Though, it's unclear if anything can really squash BrainChip's valuation. It is still commanding a market capitalisation of over $1.5 billion despite generating next to no revenue and having largely unproven technology.
Time will tell if the company ever lives up to the hype and justifies this valuation.
