Brainchip shares could get a massive boost this month: here’s how

A big honour for the technology stock is coming in June. What is it and how can it excite investors?

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Unlike most other technology stocks, Brainchip Holdings Ltd (ASX: BRN) investors have enjoyed a nice share price rise over the past 12 months.

But their smile might become even wider this month as the stock is set to receive a tidy external boost.

After market close on Friday, S&P Dow Jones Indices announced that Brainchip would be added to the prestigious S&P/ASX 200 Index (ASX: XJO) on 20 June.

Brainchip’s promotion will take place as part of the index’s quarterly refresh, which sees three other companies added and five removed.

So why is this a big deal?

As well as the qualitative glory, membership to the ASX 200 can boost the share price.

This is because passive funds that follow the index will be forced to buy the stock.

The short-term rise in demand may lead to the price spiking, but the fund managers will still be obliged to buy Brainchip shares.

Pre-revenue hype for Brainchip

Brainchip is a pre-revenue developer of artificial intelligence computer chips. Its flagship technology is the Akida chip. 

Back in 2020, the shares ballooned after it became a local “meme stock”. After the excitement died down it settled in the 30 to 60 cents range for about a year.

But over the last six months, investors have again flocked to the stock after a series of favourable business deals to have it trading at $1.06 to start Monday.

During a time when tech shares have fallen out of favour, the Brainchip stock price has risen 127% since November.

That’s despite a 50% drop since mid-January.

The Motley Fool colleague Aaron Teboneras wrote last week that Brainchip’s current share price is “extremely attractive” if the business can “deliver on its potential”.

“The Akida chip is designed to think like a human brain and it can be used for a variety of purposes worldwide,” he said.

“These include in the manufacture of smart cars such as the Mercedes EQXX concept car as well as in home automation, unmanned aircraft, medical instruments, cybersecurity, and more.”

Motley Fool contributor Tony Yoo has positions in Brainchip Holdings Ltd. 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.

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