What happened
There are many risks associated with buying aggressive growth stocks, and Chinese electric vehicle (EV) maker Nio (NIO 1.16%) certainly qualifies as one. Some specific risks seem to be top of mind for investors today, and as a result, Nio shares were dropping quite a bit. The stock was down more than 7% early in Tuesday's session, and as of 1 p.m. ET, Nio shares still remained down 6.3%.
So what
Names in the EV sector often trade on macro issues, but even on a day when the tech-heavy Nasdaq Composite index is underperforming the broader market, Nio shares are struggling even more. Two concerns specific to Nio may be what have investors jittery right now.
Image source: Nio.
First, Brian Gu, president of Chinese EV peer XPeng, was on financial news network CNBC today discussing concerns that Chinese regulators could push for the delisting of U.S.-traded Chinese stocks. Gu acknowledged the risk and said no one knows what direction the Chinese government could take. He said the company was continuously monitoring the situation.
Also today, the network reported that automotive giant Toyota Motor is planning to invest $35 billion by 2030 for a lineup of 30 EVs. That news is just another reminder that Nio and other EV makers face growing, and well-capitalized, competition in the near future.
Now what
Both items are simply reminders that investments in Nio involve large risks. And with the company valued at more than $50 billion without yet reporting a profit, there could be real downside for the stock.
On the brighter side for stakeholders, Nio is preparing to hold its annual Nio Day event this weekend. The risks with an investment in Nio are real, but nothing materially changed today. Investors should pay attention to any new developments from this weekend's event, but they also need to remember that Nio will likely be a volatile, and risky, holding going forward.
