It must be getting increasingly difficult for investors in Plug Power (PLUG 2.51%) to hold their nerve. The hydrogen stock sank Tuesday morning and was down by 8.9% as of 1 p.m. ET. With that drop, Plug Power stock has now lost almost 30% of its value in just the month of May.
The broad stock market indices also tumbled Tuesday, in part due to a tech sell-off triggered by social media company Snap (SNAP -0.07%), which warned that its growth was decelerating and revised its guidance downward.
You may wonder why Plug Power stock crashed given that it has nothing to do with social media or even tech, for that matter. The thing is, it's a growth company that's still trying to establish itself in a nascent industry. A rising interest rate environment already adds to the challenges such companies face, and those headwinds could worsen if economic growth starts slowing down -- or worse, if there's a contraction.
So when Snap slashed its full-year guidance, saying the macroeconomic environment has "deteriorated further and faster than anticipated" since late April, traders panicked and dumped shares of companies in nearly every growth industry.
To add to investors' fears, well-known investor Ray Dalio -- founder of the world's largest hedge fund, Bridgewater Associates -- said in an interview with CNBC on Tuesday morning that "cash is still trash" in this inflationary environment, but emphasized that "equities are trashier."
He also suggested that investors should stay away from stocks until the market cools off further. With the U.S. experiencing its highest inflation in nearly four decades and the economy still running hot, Dalio said he believes the Federal Reserve may have a hard time taming inflation without setting off a recession.
Just last week, Plug Power bagged a big order for electrolyzers. Analyst Stephen Byrd from Morgan Stanley believes this one order alone could bring half a billion dollars in revenue for the company in 2024. For perspective, Plug Power expects to generate between $900 million and $925 million in revenue this year.
However, although green hydrogen may have strong potential, Plug Power is still years away from profitability. With the company also facing cost pressures of late, traders aren't taking chances -- they're selling shares off in anticipation of an economic slowdown.