Why did the BrainChip share price surge 7% today?

The artificial intelligence company's shares have bounced back after two successive days in the red.

Key points
  • BrainChip has defied the sell-off in the tech sector over the last year
  • Investors could be feeling bullish on the company's commercialisation efforts
  • Meanwhile, its discounted share price may tempt some risk-averse investors into buying shares

The BrainChip Holdings Ltd (ASX: BRN) share price soared 7.23% today despite there being no news from the company.

Shares in the ASX artificial intelligence company ended the day trading at 89 cents each. The gains came following two successive trading days of losses — the BrainChip share price fell 3.49% on Monday and 5.49% on Friday.

Meanwhile, the S&P/ASX All Technology Index (ASX: XTX) closed down 0.03% to 1,998.2 points, while the S&P/ASX 200 Index (ASX: XJO) ended the day 0.41% higher at 6,496.2 points.

It was a day of mixed results for BrainChip's peers, as follows:

  • Link Administration Holdings Ltd (ASX: LNK) down 1.64%
  • Objective Corporation Limited (ASX: OCL) up 1.23%
  • Megaport Ltd (ASX: MP1) up 6.72%

BrainChip has been on a wild ride over a medium timeframe, with its share price zig-zagging from peak to trough. It's down more than 3% over the past six months but is up 120% over the past year.

So let's cover some developments for the company to make sense of its most recent share price recovery.

A man and a woman sitting in a technology-related work environment high five each other while the man wears headphones around his neck and the woman sits in front of a laptop.

Image source: Getty Images

What's going on with BrainChip?

Tech start-ups with a decent runway to reach break-even profitability were said to be severely affected by rising interest rates by the Fool earlier this month. They're also being hammered by a sector rotation out of growth to value stocks that began last November.

It's also valuable to mention that BrainChip has outperformed many of its ASX technology share peers over the past year.

Additionally, my Fool colleague Tony notes, "although still in a pre-revenue stage, the business seems to be impressing the market with incremental deals that suggest its technology might actually have a future".

This optimism may be buoyed by the fact that BrainChip is charting towards profitability through its various commercialisation efforts. Its main focus is on its AkidaTM neuromorphic IP, with technical scoping completed and commercial partnerships established with potential suitors.

Another point is that shares of tech start-ups are considered 'moonshots' because they sometimes either succeed or fail spectacularly. When the odds of losing money are low, a primary consideration is the price of admission, with lower share prices conferring less risk capital required for a potentially huge payout.

Thus, even in an uncertain environment where most people are concerned with keeping their portfolios above water, some choose to allocate their parts to more adventurous investments as they believe the value is too good to pass up.

BrainChip share price snapshot

The BrainChip share price is up 11% this year to date. Meanwhile, the ASX 200 is down 14% over the same period.

BrainChip has a market capitalisation of around $1.42 billion.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Link Administration Holdings Ltd, MEGAPORT FPO, and Objective Corporation Limited. The Motley Fool Australia has recommended MEGAPORT FPO. 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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