Why is the BrainChip share price booming 6% on Friday?

The Brainchip Holdings Ltd (ASX: BRN) share price is up by 5.88% this afternoon amid a broader lift in Australian shares as well as US equities overnight.

Shares of the AI company are currently trading for 63 cents apiece.

ASX tech shares are on an absolute ripper on Friday, with the S&P/ASX 200 Info Technology Index (ASX: XIJ) among the best-performing sectors on the ASX. It’s currently up by 3.72%.

Given today’s market action, it should be no surprise that some of BrainChip’s tech peers are also surging higher. Here’s a snapshot of how they’re doing:

• Megaport Ltd (ASX: MP1) up 11.15%
• Novonix Ltd (ASX: NVX) up 9.24%
• Hansen Technologies Limited (ASX: HSN) up 6.25%
• Data#3 Limited (ASX: DTL) up 5.5%
• Nearmap Ltd (ASX: NEA) up 0.73%

Meanwhile, the broader S&P/ASX 200 Index (ASX: XJO) is gaining 2.43%.

So why are tech shares like BrainChip doing so well today? Let’s investigate what unfolded for US equities overnight to see if we can piece together the story.

What’s going on with BrainChip?

The Nasdaq Composite (NASDAQ: .IXIC), the S&P 500 Index (SP: .INX) and the Dow Jones Industrial Average Index (DJX: .DJI) all made record one-day gains in US trading overnight, CNBC reports.

The tech-heavy NASDAQ lept 7.35%, its best one-day gain since March 2020.

As my Fool colleagues in the US note, these indices jumped amid optimism that inflation could finally be cooling down by a significant degree.

The Consumer Price Index (CPI) made gains that came in below expectations. The index rose 0.4% from September and ended October 7.7% year over year.

The bigger picture is that with inflation falling, the Federal Reserve may be more inclined to be more dovish in regard to future interest rate hikes, which has an important implication for tech shares especially.

Tech shares like BrainChip are often hit the hardest when interest rates rise, as my Fool colleague Cathryn noted in September.

Rising interest rates reduce the valuation of these shares significantly because they are valued on their future growth prospects.

BrainChip share price snapshot

The BrainChip share price is down 7% year to date but up almost 29% over the past year.

Meanwhile, the ASX 200 is down 4% and 3% over the same timeframes.

The company’s market capitalisation is around $1.02 billion.

The post Why is the BrainChip share price booming 6% on Friday? appeared first on The Motley Fool Australia.

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More reading

• 5 reasons I would avoid BrainChip shares at all costs
• Why did the BrainChip share price pop then drop today?
• Why did the BrainChip share price lose a quarter of its value in October?
• These were the worst-performing ASX 200 shares in October
• Why Brainchip, Bubs, EML, and Fortescue shares are falling today

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Hansen Technologies, MEGAPORT FPO, and Nearmap Ltd. The Motley Fool Australia has recommended MEGAPORT FPO and Nearmap Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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