Why Brainchip shares are 15% down today

BrainChip shares are down heavily this week, a decline capped off with the company’s latest quarterly report published on 28 October. The company’s technology has consistently shown high potential, but it remains uncommercialised and with significant uncertainty remaining as to its further commercial rollout, i.e. new customers.

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Brainchip shares up this year, but strongly down this week

Despite today’s fall, BrainChip shares are up over 50% in the last 12 months and up 6% in CY22. They reached an all time high of $2.34 in early February 2022. 

BrainChip (ASX:BRN) share price chart (Graph: TradingView)

The one thing underlying the momentum of BrainChip shares is the promise of its product Akida – an Artificial Intelligence (AI) chip that is inspired on the biological brain that can learn autonomously. Being a pre-revenue company, it was difficult to value the company, but there were significant M&A deals in the space (such as Intel’s US$2bn acquisition of Habana Labs), which could justify a 9-figure valuation.

Check the research that our parent company Pitt Street Research wrote on BNR here.

Investors want news, or at least some word from the CEO

But BrainChip shares couldn’t escape the market onslaught from setbacks during the quarter. The company burned US$3.8m during the quarter (up from US$2.8m last quarter) and generated barely over US$100,000 in revenue.

At current burn rates, it will need a capital raise in less than 6 quarters. There also has been a lack of newsflow from the company of late and not a lot has been heard from the new CEO since May 2022 when he visited Australia for the first time.

BrainChip shares are still up in the last 12 months and the company is valued at over A$1.2bn. But it will be increasingly hard to justify that valuation for Brainchip shares unless the company starts walking the walk of commercialisation, i.e. with solid announcements of new deals and customers.

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