Artificial intelligence (AI) stocks have been on every investor’s radar, and some Small-Cap AI Stock have delivered remarkable returns in recent months. One standout is Brainchip Holdings Ltd (ASX: BRN), a company developing cutting-edge neuromorphic computing technology. If you had invested $8,000 in Brainchip shares in September 2024, you’d now be sitting on a $15,250 portfolio—an impressive 90.6% gain in just five months. But before jumping on the AI bandwagon, let’s break down what’s been driving this stock’s performance and whether it’s still a good buy.

The AI Boom and Brainchip’s Meteoric Rise

Brainchip’s Akida processor, designed to mimic human brain functionality while enabling local machine learning without relying on the cloud, has positioned the company as a frontrunner in the AI revolution. While the broader S&P/ASX 300 AI sector has faced turbulence, Brainchip’s innovative technology has kept investors intrigued.

Between September 2024 and February 2025, Brainchip shares surged from 16.0 cents to 30.5 cents, rewarding early investors handsomely. However, this journey was anything but smooth, with significant fluctuations along the way. The stock’s history reveals both incredible highs and steep drops, making it a volatile yet enticing option for risk-tolerant investors.

What’s Driving the Volatility?

AI stocks are notoriously volatile, and Brainchip is no exception. While it has delivered triple-digit returns in the past, the company has also experienced sharp declines. For instance, in January 2025, Brainchip shares tumbled 21.8% following two key developments:

• Capital Raise: On January 7, Brainchip announced an expanded Put Option Agreement (POA) with LDA Capital, increasing available funding to $140 million. Investors reacted negatively, concerned about potential dilution and uncertain near-term revenue.
• AI Sector Jitters: A broader sell-off in AI stocks, triggered by Nvidia Corporation’s (NASDAQ: NVDA) struggles against China’s DeepSeek AI program, further pressured Brainchip’s stock, causing a steep 15.4% drop on January 28.

Despite these setbacks, Brainchip’s CEO, Sean Hehir, remains optimistic. The company’s December quarter saw promising commercial agreements with major defense and aerospace contractors, indicating a long-term revenue roadmap.

Should You Invest in Brainchip Now?

Brainchip’s explosive growth highlights the opportunities AI stocks can offer. However, its volatility underscores the importance of timing and risk management. Investors keen on AI’s long-term potential should weigh the company’s innovative prospects against its financial challenges.

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