When BrainChip Holdings Ltd [ASX:BRN] declared that CEO Louis DiNardo would be stepping down on Tuesday, it shocked the market. Sending the BRN share price reeling due to the unexpected and untimely nature of the announcement.
Furthermore, the fact that DiNardo’s tenure came to an end immediately, raised some eyebrows.
One has to wonder whether the ‘mutually agreed’ upon decision was in fact mutual at all. After all, it is not uncommon to see boards push out CEOs if they so desire.
A possibility that BrainChip shareholders would have no doubt considered. Especially given the timing of this decision and the stock’s breakout year in 2020.
Today though, the share price has recovered from this shock, up 5.41% at time of writing — and rising.
So, where does this leading tech stock head from here?
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Prepping for the next leg up; or headed for the bottom of the barrel?
If you listen to the mainstream pundits, it’s easy to write off BrainChip’s recent success. The kind of hyped-up tech stock that gets quickly labelled a ‘bubble’.
Just look at some of the backhanded comments from the AFR earlier this week:
‘The stock, a poster-child favourite of less sophisticated Robinhood-style retail investors on social media, was last week added to the ASX300 index.
‘The artificial intelligence chipmaker’s story has proven extremely popular among retail investors, some of whom entered the sharemarket for the first time in 2020, as government stimulus payments and lockdowns encourage speculation.’
It’s clear that the author has some fair disdain for the stock. And calling out ‘first time’ investors in the process.
Personally, I think it’s a poor look. After all, we should be encouraging people to get involved in the stock market, not mocking them for their decision-making.
You’ve got to teach new investors about risk management and sound decision-making. And speculation is a big part of that, for better or worse.
As for BrainChip itself though, well I don’t think they’ll care too much about this noise. Tech stocks are renowned for being polarising — especially when they are as unprofitable as BrainChip currently is.
It is hard for those with a traditional investing approach to understand the appeal of a stock like BrainChip. One that has built momentum out of its forward-looking approach and narrative, rather than the figures on its balance sheet.
Does that mean it is destined for success? Certainly not.
Any stock carries risk, and BrainChip carries more risk than most.
But it is the potential reward (no matter how slim it may be) that investors are paying for. A company that is building and developing technology that could upend digital systems as we know it.
Putting that into a stock-standard model of ‘value’ though, isn’t exactly possible. At least, not without taking a lot of liberties and adding a lot of guesswork.
Which begs the question, will BrainChip shares go up or down from here?
Sadly, there is no simple objective answer that I can give you.
All I can say is that the company has reached a major juncture. One where they now have the freedom and the recognition to find a CEO that is fit to oversee the next stage of this company. Wherever that may take them.
And for that reason, I think shareholders should be at least a little excited. Because while losing one CEO certainly doesn’t look good on paper, it does present an opportunity to find an even better replacement.
Don’t get me wrong either, DiNardo has clearly done a fantastic job to this point.
But now BrainChip has the freedom and flexibility to choose its next direction. Whether that be further development, fast-tracking commercialisation, or even exploring new market use cases.
After all, AI isn’t going away anytime soon.
In fact, it is only going to become more prominent.
It is now up to BrainChip to find out how exactly they fit into the bigger picture — a task that could see this stock reach even greater heights or fizzle out into obscurity.
Only time will tell…
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Regards,
Ryan Clarkson-Ledward,
For Money Morning
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