Brainchip Holdings (ASX: BRN) shares are 39% up on the day. There’s no particular news to push BRN shares in this manner. It’s possible to construct several different arguments about what is happening. There is the suggestion, for example, that there’s a short squeeze going on. Which could be true but no one ever does sit down and decide “Let’s squeeze those shorts.” There needs to be an underlying and substantive reason for people to change their minds which then leads to the short squeeze. It could also be just one of those things, the Brainchip share price has been falling over the months, maybe now it’s time for a bit of a rise?
Our own theory - and everyone can only have a theory here, given the paucity of new information - is that it’s a reconsideration of the sector. As we’ve said before about Brainchip Holdings: “Brainchip Holdings (ASX: BRN) seems to be doing most things right. It’s right in the middle of the truly sexy business of our time, artificial intelligence. It’s doing what strikes near everyone in the business as the right thing, coding AI into silicon for use across networks. So, BRN shares should be motoring, right? Except they’re not - they’re down 77% year to date. True, they’re up 16% today on decent stock turnover but that’s small comfort for long term holders. What is it that’s going wrong here? The answer is simply that chip development is an incredibly risky business. Get it right, become the new standard, and it’s a veritable gold mine. But there are always a lot of also rans in any such race.”
Brainchip Holdings share price from Google Finance
The whole AI field is getting much more excited. There’s Twitter’s Grok - which ends up being a real time AI, not limited to the end of the training period months ago - and GPT5 is now about to roll out. OK, so that’s producing rising interest in the field. Then there’s something which simply is true. At present AI runs on graphics chips - lots of floating point operations. Just as crypto moved from general purpose CPUs over to graphics chips. But also as crypto did, we all know that it will end up moving over to ASICS, application specific chips. Which is exactly what Brainchip itself does, ASICS for AI.
Now, we don’t know which AI model will win out, even whether any single one will. So we don’t know which AI will end up being embedded into ASICs. But we do know that that’s the way the industry is going to go. To the obvious benefit of one or another company specialising in ASICs for AI. At which point, why not Brainchip?
These sorts of realisations don’t happen overnight, no, but they do happen pretty quickly when they do. Our read is that the rise in BRN shares is simply an increased interest in the sector.
