Brainchip Holdings Ltd (ASX: BRN) shares have continued their slide on Tuesday.
In fact, the semiconductor company's shares have dropped 3% to a 52-week low of 59 cents.
This means Brainchip shares are now down 60% over the last 12 months, as you can see below.
With the meme stock trading at this level, some investors may now be considering an investment. So, let's take a look at the bull and bear case for the company.
Bull case
With its Akida product, Brainchip claims to have created the world's first commercial neuromorphic processor. It aims to mimic the brain to analyse only essential sensor inputs at the point of acquisition, rather than through transmission via the cloud.
This apparently makes the technology particularly suitable for edge artificial intelligence (AI) uses. This is a market that has been tipped to grow very strongly over the next decade as manufacturers look for ways to reduce power consumption.
Brainchip also explains that by "keeping machine learning local to the chip, independent of the cloud, also dramatically reduces latency while improving privacy and data security."
Another thing that bulls will highlight is Brainchip's inclusion in the Arm AI partner program. This is an ecosystem of hardware and software specialists enabling developers to deliver the next generation of AI solutions. Think of it as a Bunnings store and developers can browse the shelves and pick out the bits of technology they want for whatever they're building.
The company also has a strategic partnership with MegaChips, which is a leading provider of chip solutions. It plans to leverage and licence Brainchip's Akida intellectual property to provide U.S. customers with applications across a wide variety of applications, such as consumer tech, telecom/network, industrial, and automotive.
Bear case for Brainchip shares
Where do I begin? Brainchip shares are not new to the Australian share market. The company has been around a long time and has a history of releasing hugely promising announcements that ultimately go nowhere.
A few years ago, its technology was going to revolutionise Las Vegas casinos and the French police force, but nothing ever came of it. There's nothing to say that it won't be the same this time around.
Bears also point to the significant competition that the company faces. The likes of Nvidia, Intel, IBM, and Qualcomm are all in the same market and have budgets materially larger than Brainchip.
In fact, given that Brainchip's technology is out there in the world, it begs the question why a company like IBM would not just acquire Brainchip if it felt that its technology was going to change the game.
In FY 2022, IBM spent US$6.6 billion (A$9.5 billion) on research and development activities. It was also sitting on a cash balance of US$8.8 billion (A$12.6 billion) at the end of December. This means it could snap up Brainchip many times over and still have plenty of cash leftover. This could be interpreted as a sign that Akida is not seen as a threat in the industry.
Another key part of the bear case is that despite Brainchip shares crashing over the last 12 months, the company still has a $1 billion market capitalisation. That's also despite the company generating less cash receipts than some city cafes during the last couple of quarters and management stating that it was experiencing the "greatest amount of sales activity and engagement" in its history. Maybe they should open up a café at Brainchip HQ.
Final word
The odds certainly are stacked again Brainchip and its market capitalisation implies huge future sales growth.
Before looking at an investment, consider what would have to go right for your investment to go well. Chances are, there will be a long list of things and little room for error.
