Why has the BrainChip share price crashed 19% in 2023?

Investors have been hitting the sell button again this year, sending this meme stock deep into the red…

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Key points
  • Brainchip shares have been sold off in 2023
  • The meme stock has a good story but not substance and generates less revenue than some cafes
  • Its billion dollar plus valuation is attracting short sellers

The Brainchip Holdings Ltd (ASX: BRN) share price is having a difficult start to the year.

Earlier today, the semiconductor company's shares dropped almost 2% to 61 cents.

When the Brainchip share price hit that level, it meant it was down 19% since the start of the year and a massive 63% over the last 12 months. The latter can be seen on the chart below.

Three guys in shirts and ties give the thumbs down.

Image source: Getty Images

Why are investors selling down the Brainchip share price?

Investors have been selling down the company's shares over the last 12 months due to its abject financial performance.

Despite hyping up its technology, market opportunity, and sales activity and engagement, the company is still generating less revenue than some cafes.

That wouldn't be too bad if the company had a $50 million to $100 million market capitalisation, but that is not the case.

Brainchip had a market capitalisation approaching $3 billion 12 months ago. And while that has now dropped down to approximately $1.1 billion, it is still a crazy valuation for a loss-making tech stock with a tiny team that is trying to compete with absolute behemoths that spend billions of dollars on research and development each year.

But that's what happens when a meme stock has a good story and a strong social media following.

Short sellers appear to have caught onto this and have been increasing their positions in the company in recent months.

Clearly, they believe the Brainchip share price can fall materially from current levels. And as we have seen plenty of times in the past, it is never wise to bet against short sellers.

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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