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Brainchip share price up 1000% in 5 months. Is it the next big thing?

cartoon brain standing on winner's block representing rising Brainchip share price
Image source: Getty Images

The BrainChip Holdings Ltd (ASX: BRN) share price has been rising to new multi-year highs thanks to the development of its ground-breaking Akida Neuromorphic System-on-Chip. At the time of writing, the Brainchip share price has jumped nearly 18% today alone to 33 cents.

As the ASX tech share announced new partnerships and arrangements to cement its position as a leading artificial intelligence (AI) specialist, investor attention has been growing at a rapid rate.

What’s been happening with the Brainchip share price?

It’s hard to believe the Brainchip share price has once again risen like a phoenix from the ashes.

Founded in 2011, the United States-based tech company hit an all-time low of 1.1 cent in January 2015. With a vision to mimic the human brain through a microchip, this prompted former Australian mining company, Aziana Limited, to acquire the tech company at a discounted rate.

In the months following the deal, the Brainchip share price reached a record high of 46 cents in November 2015.

However once again, the company’s shares plummeted in value due to the uncertain economic environment caused by COVID-19. Brainchip shares were trading at 3 cents in March 2020.

For the brave investor who bought the company’s shares during the bear market and held onto them until today, a gain of 1000% would be showing on the right side of their holdings. Impressive returns for just five months of patience.

What has fuelled Brainchip’s share price rise?

Defying challenging market conditions, the world’s only pure-play AI company has been making tailwinds.

Last week, Brainchip announced its partnership with Magik Eye Inc. to combine its AI processing unit with revolutionary 3D depth sensing technology. The collaboration further strengthens the capabilities of Brainchip’s promising Akida neuromorphic processor and opens up new market opportunities for revenue.

The week before, Brainchip entered a put option agreement with LDA Capital Limited, a US-based investment group. The agreement provides a financing facility of up to $29 million over the next 12 months. The drawdown will strengthen Brainchip’s balance sheet and support the commercialisation of its pioneering Akida technology.

In its most recent quarterly update to the market, the company advised it had completed the wafer fabrication, assembly and test operations of the Akida device. The early access program and proof-of-concept engagements are expected to commence this month.

The company is expected to release its 1H20 results some time this week.

Is Brainchip a bargain buy?

Investing in small-cap shares that mature to become a dominant force with large recurring revenues can be life changing for an early investor.

Indeed, it is considered a risky play which is why I would never recommend more than 5% of your portfolio in 1-2 companies with a market capitalisation of less than $500 million.

Having said that, I believe today’s Brainchip share price has huge potential to materially grow in the future. Cutting-edge technology mixed with insatiable demand is an investor’s dream.

I would certainly be a buyer of the Brainchip share price today with a view to holding for the long term.

Remember, successful investing requires immense discipline and patience.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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