The recent surge in South Korean and Chinese stocks linked to superconductors has some analysts worried that their gains may be approaching bubble status. The run-up in superconductor-related stocks is being compared to the jump in meme stocks that rallied sharply with no fundamental basis for their gains. Claims about a breakthrough in superconductor technology have sparked a rally in some superconductor stocks even as scientists expressed doubts about the claims.
Interest in superconductor stocks soared earlier this month after a team of South Korean scientists said they discovered a material called LK-99 that can transmit energy without any losses at room temperature. Investors jumped into any stocks related to superconductors on the news, despite warnings from regulators and companies, who said they have no direct links with the study. SK Securities said until there is an actual verdict on the validity of LK-99, moves in superconductor stocks will be swayed by news flows.
However, doubts about the claims of a breakthrough in superconductor technology sent many recently bid-up superconductor-related stocks plunging. The University of Maryland’s Condensed Matter Theory Center challenged claims made by the Seoul-based Quantum Energy Research Centre that it synthesized a material (LK-99) capable of conducting electricity with zero resistance at room temperature, saying, “With a great deal of sadness, we now believe that the game is over. LK-99 is not a superconductor, not even at room temperature. It is a very highly resistive poor-quality material. Period. No point in fighting with the truth. Data have spoken.”
The wild swings in superconductor stocks are being compared to the similar collapse of meme stocks in 2021. Also, the doubts about the claims of a breakthrough in superconductor technology have fueled short sellers to ramp up their short positions in superconductor stocks. According to data from HIS Markit, short positions in free-floating shares of American Superconductor (AMSC) have risen to 10.7% from almost zero at the end of July.
The craze in superconductor stocks has fueled unprecedented volatility in the sector, much like that in the meme stock mania as retail traders bid up the stocks despite a lack of fundamental news. Many of the superconductor-related stocks that rose on hype have now plunged when they said they weren’t conducting any research on superconductors. KDI Asia Ltd said, “The idea of room-temperature superconductors will continue to lure speculative trades. But we don’t see a fundamental earnings boost for any related companies. It’s just hope.”
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