Today's surge in shares for electric vehicle companies Tesla, Rivian, and Aehr Test Systems can be attributed to various factors.
Electric vehicle stocks, including Tesla (TSLA), Rivian (RIVN), and Aehr Test Systems (AEHR), experienced a surge on Wednesday, with gains of 5.2%, 4.7%, and 15.8% respectively. This rally was primarily due to the latest inflation report and its implications for consumer purchasing power and interest rates.
Inflation, particularly the core CPI, cooled more than expected, providing relief from fears of an inflation reacceleration. Electric vehicles are large-ticket items that are often financed, and high interest rates can discourage purchases, particularly for EVs that have upfront costs higher than traditional vehicles. The cooling of core inflation, thus, eased some concerns for investors.
The stock market rally was also spurred by today's announcement of the December Consumer Price Index (CPI). While the overall CPI came in hotter than anticipated, the core CPI, which excludes volatile food and energy prices, cooled more than expected. This led to a "risk-on" rally in risky assets, including these EV-related stocks.
Tesla, which saw a pullback following its miss on fourth-quarter deliveries and concerns about its first-ever annual sales decline, Also Rivian, which beat its fourth-quarter delivery target but struggled amid concerns about interest rates, and Aehr Test Systems, which disappointed investors with its earnings, all saw stronger performances.
While it's difficult to say whether this CPI report marks the end of the downturn for EV-related stocks, it's certainly a positive data point. The electric vehicle sector is still a risky bet, especially considering its high multiples or unprofitable status. Investors may want to stick with the highest-quality and profitable players in the EV supply chain.
Despite the challenges, the electric vehicle sector offers significant growth potential. Continuous innovations in battery technology and charging infrastructure are improving the viability and appeal of EVs, while the technological advancements in the sector hold the promise of reducing greenhouse gas emissions and contributing to a sustainable future.
Investors need to keep track of not only interest rates but also technology innovations and government policy changes to stay informed and make informed investment decisions in the electric vehicle sector. Despite the risks, the potential rewards make it an exciting and lucrative area for investment.
Given the positive impact of the lower-than-expected core CPI on EV-related stocks, investors might consider diversifying their portfolio by investing in this sector. The cooling inflation rate could potentially decrease the cost of financing large-ticket items like electric vehicles, making them more appealing to consumers.
