The Brainchip Holdings Ltd (ASX: BRN) share price is charging higher today after the small-cap ASX tech share announced a joint development agreement with a tier 1 automotive supplier.

About Brainchip

Brainchip produces a neuromorphic processor that brings artificial intelligence to the edge in a way it believes is beyond the capabilities of other products. 

By mimicking brain processing, BrainChip has been able to pioneer a spiking neural network called Akida, which is both scalable and flexible to address the requirements in edge devices. Simply put, an edge device is any piece of hardware that controls data flow at the boundary between two networks, such as a router or a smartphone. 

Akida has been designed to provide a complete ultra-low power and fast AI Edge Network for vision, audio, olfactory and smart transducer applications. The reduction in system latency provides faster response and a more power-efficient system that can reduce the large carbon footprint of data centres.

Why is the Brainchip share price spiking?

This morning, the company announced it has signed a joint development agreement with Valeo Corporation that utilises Brainchip’s Akida neuromorphic System-on-Chip (SoC).

Valeo Corporation is a tier 1 European automotive supplier of sensors and systems for autonomous vehicles (AV) and advanced driver assistance systems (ADAS).

The agreement will see the two companies collaborate on the development of neural network processing solutions for AV and ADAS.

Brainchip believes the validation of its Akida device by a tier 1 supplier of this nature is a significant development.

In AV and ADAS applications, real-time processing of data is critical for the safety and reliability of autonomous systems. Suppliers and manufacturers in the automotive industry have reportedly recognised that the Akida SoC is ideally suited to process data at the “Edge” for their advanced system solutions.

According to Brainchip, by combining the Akida neural network processor with sensors, the resulting system can achieve ultra-low power, minimum latency, maximum reliability, and incremental learning.

“The Akida neural processor’s game-changing high performance and ultra-low power consumption, enables smart sensor integration by solving power and footprint challenges for a variety of sensor technologies,” the announcement read. 

Brainchip was a little light on details but stated the agreement provides for specific performance milestones and payments that are expected to cover the company’s expenses. The term of the agreement is defined by the achievement of performance milestones and the availability of the Akida device.

At the time of writing, the Brainchip share price has surged 42.04% higher to 12.5 cents per share. This takes the company’s current market capitalisation to around $183 million.

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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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The Australia and New Zealand Banking Group Limited (ASX: ANZ) share price has risen over 37% in the period since close of trading on Friday 22 May. This is the largest rise of all the four major banks. The larger National Australia Bank Ltd. (ASX: NAB) follows closely behind with a rise of just over 33% for the same period. 

Why are bank shares rising?

Across the world, it’s starting to look like the economic fallout from COVID-19 could be less significant than originally anticipated. This is particularly the case in Australia. On 26 May, UBS analyst Jonathan Mott, a known market bear, raised his expectations of the banking sector. Jonathan pointed out the current underperformance of bank shares given the better than expected outlook. 

Many economic factors point to a recovery in bank performance. Not least of which was the $60 billion saving in JobKeeper due largely to clerical errors. An additional $10.6 billion in household spending power after early superannuation withdrawals and improvements in card and retail data are also contributing to optimism surrounding the sector. 

It remains to be seen what will happen in September when the government assistance comes to an end. Still, the share prices of all major banks have all been relatively slow to rise since the March low point. 

On 27 May, National Australia Bank announced it was increasing its capital raising to $4.25 billion, including an additional $1.25 billion for retail investors. This announcement appeared to carry the NAB share price higher along with the other major banks. 

Tier 1 capital fueling the ANZ share price rise

On 2 June, ANZ announced it had sold its New Zealand business UDC Finance for 1.2x tangible asset value. This will provide an additional ~$439 million of Tier 1 capital, or available cash from retained earnings, in this case. This saw the ANZ share price rise even further. 

In the ANZ chairman’s report on 28 May, we learned that statutory profit after tax was down 51% for the first half of 2020. Accordingly, the board agreed to defer the decision on dividend payments. While this does not close the door on a dividend payment, it definitely reduces the certainty around whether it will eventuate. The chairman, David Gonski, acknowledged the value shareholders place on the regular payment of bank dividends and promised further information in August. 

Foolish takeaway

It appears that the bank share prices are starting to level up to pre-pandemic levels. However, the ANZ share price is still down 14.9% year to date. Based on its current price of $20.97 at the time of writing, it would still require an increase of nearly 30% to reach the levels we saw in February prior to the crash. I’m not sure how long it will take, but I am confident the ANZ share price will return to these former levels. 

Furthermore, ANZ’s twelve month trailing dividend yield is 8.09%. This is a very healthy dividend payout. Nevertheless, it remains to be seen when or even if the banks will recommence dividend payouts at or near pre-pandemic levels. Though, I believe this is likely. 

In my view, it is the size and stability of the dividend payment that attracts fund managers and retail investors. 

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Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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