What happened

Solid-state battery maker QuantumScape (QS -4.16%) has hit a critical juncture in its bid to introduce a new technology to the electric vehicle (EV) sector. Investors initially cheered the milestone announcement, sending shares higher by about 15% Tuesday morning. However, that bounce didn't hold, and the stock was down by 0.8% as of 2:28 p.m. ET.

So what

QuantumScape announced today it has begun shipping prototypes of its solid-state battery cells to potential automotive customers. The company has spent the past two years proving its solid-state battery concept and working toward a commercially viable unit. The company built its first multilayer cell in early 2021 and successfully produced a 10-layer cell later that year. The 24-layer cell it just began shipping is what is required to produce a commercial version of the product. These will now begin testing by automotive manufacturers.

Now what

QuantumScape called today's announcement an important part of the commercialization process and said it was its "key public milestone for the year." So investors may be wondering why the stock gave up all its gains today, especially after the stock has already dropped more than 70% year to date. 

The answer lies in the bigger picture. QuantumScape shares sank this year along with many unprofitable companies in the EV sector. That came as many investors' risk appetites changed with the economic and interest rate outlooks.

The validation and commercialization process remains lengthy, however. While this step in the process is critical, commercialization remains several years away for QuantumScape. Investors today may have felt that given the risks still involved, it is still early to put capital into a company that may not pay off for years.