Is QuantumScape Stock the Next NVIDIA, and Should You Buy It?

QuantumScape Corporation QS recently hit a major milestone, boosting investor interest as 17.4 million shares were traded on Thursday, a 38% increase from the previous session. QuantumScape’s shares jumped 34.9% in yesterday’s trading and have increased 92.7% over the past month.  

The solid-state battery maker is now drawing attention from investors due to higher trading activity and positive news, drawing comparisons to NVIDIA Corporation’s NVDA success with artificial intelligence (AI) technology, and prompting thoughts about its potential as a buying opportunity. Let’s explore –  

Here’s Why QuantumScape Stock Is Soaring 

QuantumScape’s shares surged following a breakthrough in its solid-state battery production process. QuantumScape introduced its Cobra separator technology, reigniting hopes among market analysts that the solid-state battery dream is becoming a reality.  

The innovative Cobra separator process is 25 times faster than the previous Raptor system, and a more compact and cost-effective method for producing solid-state battery separators. Cobra will require less floor space than its predecessor and is designed for gigawatt-scale battery production. All these factors make Cobra economically viable for mass production.  

Could QuantumScape Stock Be the Next NVIDIA? 

QuantumScape’s Cobra separator process reached baseline production ahead of schedule, marking a breakthrough in solid-state batteries for electric vehicles (EVs). This development overcomes the challenge of large-scale production that has previously hindered the EV industry’s adoption of the technology.  

If QuantumScape fulfills its battery innovation potential, it could transform EV power and challenge NVIDIA’s performance, but it’s uncertain whether it can replicate NVIDIA’s successes given its history of unmet promises.  

Meanwhile, the rising demand for Blackwell chips, AI graphics processing units (GPUs) and CUDA software will fuel NVIDIA’s growth in the cloud and automotive sectors, making it too early to expect QuantumScape to match NVIDIA’s accomplishments.  

Nonetheless, NVIDIA has been able to generate profits and control costs in a better way than QuantumScape, with a return on equity (ROE) of 109.9% compared to QS’s negative 41.4%. QuantumScape struggles to use shareholder investments effectively (read more: Is C3.ai Stock the Next NVIDIA and a Buy?). 

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Is QuantumScape Stock a Buy Now? 

Despite the recent political challenges, the EV market is set to grow. Demand for advanced batteries remains strong, particularly for those that are safer, lighter and quicker to charge. QuantumScape’s advancements in solid-state lithium battery production could lead to significant milestones and boost its stock value. Stakeholders are advised to retain their shares. 

For new entrants, the QuantumScape stock might be risky. Meeting long-term EV contract demands and maintaining quality standards remain challenges, and falling behind could cause QuantumScape’s stock price to drop. The QuantumScape stock, anyhow, is presently more volatile than the markets it trades in. It has a beta of 4.27. 

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For now, QuantumScape stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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