What happened
Shares of Xpeng (XPEV -0.70%), a Chinese electric vehicle (EV) company, are falling today just one day after its share price popped 27%. Today's drop might have come from investors reacting to a press release stating that the EV company led a $200 million investment into a fund that backs EVs and other start-ups.
Xpeng's share price was down by 9.4% as of 2:42 p.m. ET on Thursday.
So what
Xpeng was the lead investor of the fund, called Rockets Capital, and said that it is being created to focus on "venture and growth stage investments in Smart EV industry value chain, clean energy, and frontier technology areas."
Image source: Getty Images.
Rockets Capital is a private equity firm that was established earlier this year. In a statement released today, the fund said that it will operate independently from Xpeng while leveraging the EV company's "expertise and resources."
So why exactly did this news cause Xpeng's share price to slide so drastically today? It likely has less to do with Xpeng investing in this fund and more to do with the fact that many investors are reacting pretty dramatically to any news in the industry right now.
For example, just yesterday, Xpeng's stock soared 27% after the Chinese government indicated that it would work with American regulators to keep Chinese stocks listed on U.S. stock exchanges.
Xpeng wasn't in any immediate danger of being delisted, but still, the news caused its share price to skyrocket.
Now what
Xpeng's huge gains yesterday and subsequent drop today should be a good warning sign for investors to tread carefully with EV stocks right now.
While the EV market has tons of long-term potential, investors are still trying to gauge how it will handle rising costs due to high inflation, a conflict in Eastern Europe, and an ongoing semiconductor shortage.
Investors have been reluctant to fully embrace growth stocks lately, and that means EV stocks like Xpeng could experience more volatility in the short term.
