Shares of electric-vehicle battery start-up QuantumScape (NYSE:QS) were trading lower today, amid a wider sell-off of emerging companies in the electric-vehicle space. As of 1:45 p.m. EST, QuantumScape's shares were down about 12.75% from Monday's closing price.
QuantumScape is what we might call a "moonshot" stock. The company has no significant revenue and doesn't expect any for at least a few years -- but it has some groundbreaking new technology that might lead to much improved batteries for electric vehicles.
The details are complicated, but for our purposes, the thing to keep in mind is that this a speculative stock. It might be huge in 10 years or not be around at all.
That's important because what seems to be happening in the broader market on Tuesday is a lot of so-called "risk-off" trading. Congress is debating a $1.9 trillion COVID-19 relief package, which has raised inflation concerns in some quarters. Whether those concerns are valid or not, the benchmark U.S. 10-year Treasury rate has been rising recently. It's now close to a one-year high.
When interest rates are rising, investors often look to reduce portfolio volatility. That can mean selling down their most speculative holdings, like (for instance) stocks of electric-vehicle companies with little or no current revenue.
That's probably a big factor in what's happening in the U.S. markets today, and probably a big factor in QuantumScape's downward move.
The thing to keep in mind is that nothing has changed with respect to QuantumScape itself, which just last week gave a promising update on its progress toward mass-produced solid-state batteries. It's still led by the same impressive management team, Volkswagen is still a long-term strategic partner, and it's on course to begin manufacturing its innovative batteries in 2024. It's still a high-risk, high-potential-reward investment.
Put another way, for long-term investors who liked QuantumScape before this sell-off, this may be a buying opportunity.