[SYDNEY] A meteoric rally in an Australian penny stock is fast unravelling after confounding not just market watchers but also the company's chief executive officer (CEO).
BrainChip Holdings, an artificial intelligence (AI) focused startup whose flagship product is yet to be made widely available for commercial use, saw its 2020 gains propel to 1,500 per cent earlier this month.
While concerns about overheating have seen the stock getting hammered since, its 762 per cent advance year-to-date still makes for one of the best performances among technology names in Asia-Pacific, according to data compiled by Bloomberg.
"I was surprised about the peak" Louis DiNardo, BrainChip's CEO, said in an interview. "Shares were overbought for a company that's just introducing its product."
BrainChip is one in a long list of global technology stocks that have surged this year as the pandemic put investor spotlight on companies focused on technological innovation.
BrainChip is developing a processor, Akida, that can be used for edge computing - which involves handling complex AI and machine-learning tasks at the so-called edge of the network instead of sending data back and forth to servers.
Shares have skyrocketed as the company signed a slew of partnerships over the past few months, including an agreement with Ford Motor in May for the evaluation of the Akida chip.
Texas-based Vorago Technologies this month agreed to participate in its "early access programme" which allows select few to test new features and give feedback before a device is rolled out to customers as a whole.
Liu Jun Bei, a portfolio manager at Tribeca Investment Partners in Sydney, isn't surprised by the sharp correction in the share price, which she says reached astronomical levels after retail investors hyped the stock on online forums such as Reddit.
Brainchip has seen multiple discussion threads on company's business outlook and stock moves over the past few months on the Reddit website.
"Brainchip have early movers advantage where we are a few years (apparently) ahead of competitors like Intel etc. And Patent protection," Fralgeen, one of the users on Reddit, wrote in a thread some 20 days ago according to the website. "I'm holding at 700 per cent gains and buying in at most dips," Fralgreen's post added.
BrainChip generated US$13,397 in revenues in the six months ended June 30, versus US$66,635 for the same period in 2019, according to its website.
But there are some who are optimistic about the firm's future prospects.
"The potential for this technology to take off longer-term is very real because it addresses a number of issues in edge computing," said Marc Kennis, managing director at Pitt Street Research, who says BrainChip's stock is fairly valued.
"The next leg up will be determined by commercial progress," he said, adding that it's possible for the stock to get back to its peak.
BrainChip's processor can be used in applications for homes, transportation, health and the industrial sector, CEO Mr DiNardo said, adding that the company plans to commercialise it in Japan, the US, Europe and Australia.