What happened
Growth and technology stocks are taking it on the chin today, with the tech-heavy Nasdaq Composite Index dropping more than 2% midday Thursday.
Several electric vehicle (EV) stocks are doing even worse. Rivian Automotive (RIVN -2.27%) and battery technology company QuantumScape (QS -1.65%) were down 5.2% and 6.2%, respectively, as of 2:10 p.m. ET. Shares of battery electric and hydrogen fuel cell truckmaker Nikola (NKLA -2.44%) recovered from a 5% drop earlier today, but remained down 2.2% at that same time.
So what
Today's drop doesn't come from any newly released news from these companies, but several macro factors are negatively impacting fast-growing technology stocks in general, helping to move these EV names as well. Inflation persists, interest rates are anticipated to continue rising, supply chain snarls have yet to unwind completely, and new COVID-19 lockdowns in China are all factors pressuring these names. Company-specific reports reflecting those challenges have come from each of these companies recently as well.
Image source: Rivian Automotive.
Now what
When Rivian reported its second-quarter update on Aug. 11, it maintained its 25,000-vehicle production estimate for 2022 but said rising costs resulted in a net loss of $1.7 billion for the second quarter. The results and current environment forced the company to increase its projected losses for the full year.
Many investors still feel Rivian has much potential, especially with support from Amazon in the form of orders for 100,000 electric delivery trucks. But these companies are largely valued on the prospects for future earnings, which are worth less in an inflationary environment.
Additionally, rising interest rates and the pressure on share prices means future capital needs will cost more. Some investors are making general calls to move away from the sector -- at least until the trends look more favorable.
Nikola said in a regulatory filing earlier this week that it plans to issue up to $400 million worth of new stock to help fund its growth plans. That includes the acquisition of battery pack supplier Romeo Power. Earlier last month, the company said it would bring Romeo's products, technology, and engineering in-house through the acquisition it valued at approximately $144 million.
Nikola is also funding the development of its hydrogen fuel cell heavy trucks with the additional capital. The company announced today that it plans to unveil the beta version of that vehicle on Sept. 19 at an event in Germany with its European partner.
Unlike Rivian and Nikola, QuantumScape doesn't have any products being sold commercially at this point. While it has been making progress with its solid-state EV battery technology, having begun the automotive qualification process, the company is still likely at least two years away from recognizing any revenue.
With prospects for positive cash flow or even revenue still so far in the distance, investors are shifting away from names like Rivian, Nikola, and QuantumScape in the current macroeconomic environment.
