What happened
Markets are heading lower today, and electric-vehicle (EV) names like Rivian Automotive (RIVN -3.34%), Lucid Group (LCID -5.49%), and Blink Charging (BLNK -2.79%) are falling far lower.
While the technology-filled Nasdaq Composite index was sharply lower by 3.2% as of 2:45 p.m. ET on Thursday, Rivian, Lucid, and Blink were far outrunning that drop. At that time, Rivian was down 7.7%, reaching its lowest level since going public just over a year ago. Lucid and Blink were also down, by 5.4% and 6.7%, respectively.
So what
In addition to one of the things moving markets lower today, there was another catalyst to explain why these early-stage technology growth stocks are plunging. Market watchers reacted to some comments made earlier this morning by billionaire hedge fund manager David Tepper of Appaloosa Management.
Tepper told CNBC that monetary policies around the developed world worried him looking toward 2023. He also mentioned that he was "leaning short on the equity markets" based on the upside-versus-downside risks. But he also qualified that in a way that investors seemed to ignore, as you'll learn below.
A Rivian pickup. Image source: Rivian Automotive.
There was also news that more directly impacted the stocks in the EV sector, helping to explain why Rivian, Lucid, and Blink were trading at, or near, all-time lows. That news came from sector leader Tesla, which stoked fears of waning demand for EVs by offering yet another round of new incentives and discounts.
Now what
Tesla has doubled the discount it is offering U.S. customers to purchase its Model 3 or Model Y before the end of the year. The $7,500 offer seems to be trying to pull sales into this fiscal year, as some potential buyers wait for federal incentives from the Inflation Reduction Act to begin in 2023. But Tesla has also dropped prices or increased incentives for customers in Mexico, Canada, and China recently. That has EV investors wondering if global demand is a problem.
If so, that would impact start-ups like Rivian, Lucid, and Blink more severely than the highly profitable Tesla. Add that to the fact that a well-respected investor like David Tepper is "leaning short," and it's clear why these stocks are tanking today.
But those being guided by Tepper's comments should realize that he was talking about his hedge fund. He noted that his investors look for short-term results, and that's not the same investment horizon of retail investors looking toward retirement. It is also not clear that overall demand for EVs has changed.
Just like the stock market, demand in the EV sector won't go up in a straight line. It's true that interest rates are rising across the globe, and there are economies that might be slowing and going into a recession. But retail investors should always focus on the long-term picture, and not make knee-jerk moves based on one person's comment or even a near-term economic slowdown.
