Why did the BrainChip share price crash 30% in June?

BrainChip’s shares were sold off in June. Here’s why…

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The BrainChip Holdings Ltd (ASX: BRN) share price had a disappointing month in June.

The semiconductor company’s shares ended the month 30% lower than where they started it.

This was despite BrainChip’s shares being added to the illustrious ASX 200 index during the month.

What happened to the BrainChip share price?

Investors were selling down the BrainChip share price in June amid broad market weakness. With interest rates increasing to combat rising inflation, this put pressure on equities.

This was particularly the case at the higher risk side of the market, where BrainChip certainly sits.

For example, even after June’s decline, the company has a market capitalisation of over $1.4 billion despite its revenue year to date being just $205,000.

When annualised to $820,000, this means its shares are changing hands for a ridiculous 1700 times revenue. And this is before the company has even proven that it has a market for its Akida neuromorphic processor.

In light of this, it is no surprise that when the market wobbles, the BrainChip share price tumbles.

What’s next?

The next 12 months will be very interesting for the BrainChip share price. With the company now commercialising its technology, it will have to let its sales do the talking rather than its press releases or podcasts.

Which may not be as easy as many first thought. Especially given that some of the hyped-up partnerships from the last 2-3 years appear to have amounted to nothing.

For example, its partnership with NASA was big news back in 2020 and is still talked about today as a reason to invest in BrainChip. But this seems to have ended after just three weeks on 18 January 2021 based on NASA data. It’s also worth noting that there was no mention of NASA in its most recent annual report.

So, should sales fail to materialise in a market dominated by some huge tech behemoths such as AMD, Intel, and Nvidia, then there’s a distinct danger that its days as a billion dollar plus company could be numbered.

Motley Fool contributor James Mickleboro 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.

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