BrainChip share price bounces off 52-week low to surge 12% in 2 days

Brainchip shares have bounced back with a vengeance. What's going on?

| More on:
Man pointing at a blue rising share price graph.

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

What an extraordinary week the BrainChip Holdings Ltd (ASX: BRN) share price has had. It was only last Thursday that Brainchip shares touched a new 52-week low of 40.5 cents per share.

But thanks to Friday's remarkable 7.3% surge, together with yesterday's still-impressive rise of 4.6%, Brainchip shares last traded at 45.5 cents each. That means that the Brainchip share price has surged 12.35% in just two full trading days:

Created with Highcharts 11.4.3BrainChip PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

Of course, it's not all sunshine and rainbows for Brainchip shares. This ASX artificial intelligence share remains down a painful 39.3% year to date. As well as by 50% over the past 12 months. And we are still about 75% below the all-time highs of over $1.75 a share that we saw back in early 2022.

But let's not dwell too much on that. So why are Brainchip shares having such a top run over the past few days?

Why have Brainchip shares bounced 12% in two days?

Well, it's not exactly clear, unfortunately. There have been no developments or news out of Branchip for a few weeks now. So the stellar performance of the last few days has got nothing to do with the company itself.

So perhaps investors just decided that the new lows we saw last week had gone too far. As we can tell from the company's performance over the past year, investors seem to be disillusioned with Brainchip's trajectory and have been drifting away from the company's shares for a while.

But disillusionment like this sometimes pushes a share too low and gets to a point of potentially undervaluing the company. Perhaps investors have decided that this situation now applies to the Brainchip share price, and have revalued the company accordingly.

This seems likely, seeing as the company's largest gains came last Friday – a day when most ASX shares were getting panned by the market. So it doesn't seem like the Brainchip share price's performance in recent days can be explained by the company just getting caught up in the good mood of the market.

Brainchip is also one of the most short-sold ASX shares on the market, as we reaffirmed yesterday. When a heavily shorted share rises in value, it can create what's known as a short squeeze.

This forces some short sellers to close out their positions, which results in fresh buying activity. This then pushes up the price of the shorted company's shares.

This could also be playing a role here.

So these factors are the most likely explanation as to why the Brainchip share price has had such a pleasing few days. Let's see what the rest of the week brings for this ASX artificial intelligence share.

Motley Fool contributor Sebastian Bowen 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 businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Technology Shares

Here are 2 exciting ASX shares rated as buys

These shares are highly rated by brokers. Let's find out why.

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
Technology Shares

Is this the decade of the data centre? One ASX 200 stock that could benefit

Let's see why one leading broker thinks this stock could be destined for big things.

Read more »

A human-like robot checks out market performance on a laptop, indicating the rise of AI shares.
Technology Shares

3 top performing ASX AI shares for your watchlist

Have you positioned your portfolio to capitalise on the next tech revolution?

Read more »

A man with a wide, eager smile on his face holds up three fingers.
AI Stocks

3 reasons to buy NextDC shares today

A leading expert forecasts more growth to come for NextDC's rebounding shares.

Read more »

A share market analyst looks at his computer screen in front of him showing ASX share price movements
Technology Shares

Why this $3.9 billion acquisition makes Xero shares a buy today

A leading expert forecasts that Xero’s $3.9 billion investment is about to pay off.

Read more »

Three young people in business attire sit around a desk and discuss.
Small Cap Shares

Tiny tech: 3 ASX small-cap shares with new ratings

Toby Grimm of Baker Young and Peter Day of Sequoia Wealth Management share their new ratings.

Read more »

Smiling young parents with their daughter dream of success.
Technology Shares

Could Life360 shares rise to $37.50?

Bell Potter has given its verdict on this tech stock.

Read more »

Man smiling at a laptop because of a rising share price.
Technology Shares

Investors should put these 2 top ASX tech shares on the watchlist

Looking for growth? These two stocks are delivering.

Read more »