Why Joby Aviation Stock Plummeted This Week

Key Points

• Joby Aviation stock moved lower early in the week in response to inflation-related pressures.

• A report from MIT that raised skepticism about AI also caused sell-offs for the stock.

• Joby stock saw some recovery on Friday in response to the shifts in the outlook on the Federal Reserve's interest-rate policy.

• 10 stocks we like better than Joby Aviation ›

Joby Aviation (NYSE: JOBY) stock plunged over the last week of trading as investors adopted more risk-averse positions in response to macroeconomic risk factors. The electric vertical take-off and landing (eVTOL) company's share price dipped 10.1% over the stretch compared to its pricing level at the previous week's market close.

Joby Aviation suffered substantial sell-offs throughout most of last week's trading as concerns about inflationary trends and valuations for artificial intelligence (AI) companies drove big sell-offs for growth stocks. On the other hand, the company's share price saw some significant recovery in Friday's trading after investors got some good news on the interest rate front.

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Joby stock sank on inflation and AI news

Joby stock got hit with big valuation pressures early in this week's trading as risk factors related to inflation and valuations for companies with significant exposure to AI trends came into focus. After the Bureau of Labor Statistics published Producer Price Index data for July last week that raised fears that higher inflation faced by wholesalers would soon cascade down to the consumer economy, Home Depot and Target published second-quarter reports this week that reinforced and added to those concerns.

Joby also saw valuation pullbacks in response to new research published by the Massachusetts Institute of Technology (MIT) that said that 95% of businesses hadn't achieved profitability on their investments in generative AI. While Joby's eVTOL craft aren't directly part of the artificial intelligence market, investors are betting that AI technologies will pave the way for self-driving capabilities that open up big growth avenues for the business.

What's next for Joby Aviation?

Joby Aviation stock got a boost at the end of last week's trading thanks to a speech given by Federal Reserve Chair Jerome Powell. In the speech, Powell indicated that the U.S. economy was continuing to see some concerning inflationary pressures -- but he also suggested that weaker overall economic activity had become the bigger concern. In light of weaker-than-expected jobs data, it seems like the Federal Reserve is on track to cut interest rates in September -- and that's good news for Joby stock.

Last week, Joby announced that it had completed its first trip between two U.S. airports in airspace governed by the Federal Aviation Administration (FAA). Notably, there were also other aircraft active in the proximity. Joby continues to make meaningful progress, but investors should understand that big risks remain along regulatory lines.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.