Lithium Stocks Are Getting Hammered. We Found Three Reasons.

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A supply storm is merging with brewing demand problems.

Lithium stocks are taking it on the chin Monday. A U.S. semiconductor maker, a Japanese battery maker, and a Chinese miner are why. Bottom line:

The problems start with ON Semiconductor , a U.S. supplier of chips for car makers. An EV contains about 14 times more ON-type chip content compared with a traditional vehicle, according to the company. Monday, ON said fourth-quarter sales would amount to about $2 billion. Wall Street was looking for $2.2 billion. Shares were down 18.% in midday trading.

The sales forecast in the company’s energy division, which includes batteries and other products, was cut by about 15% to about $5.9 billion. Panasonic blamed weakening demand for “high-end EVs” and weak consumer and industrial demand. High-end EVs typically have more expensive batteries. Auto makers, including Tesla, have been shifting to lower-priced batteries to save costs which is compounding Panasonic’s problem.

It all adds up to weakening EV demand, which is bad for a host of stocks, including lithium miners. Tesla stock is down 4.6% at $197.75 in midday trading. Rivian Automotive shares are down 2% at $15.68 apiece.

 

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