The electric vehicle (EV) industry is expected to achieve solid growth in the coming years, fueled by governments’ support worldwide. But a current semiconductor chip shortage poses a major challenge to the industry’s progress in the near-term. Consequently, we think it wise to avoid EV stocks Ideanomics ( IDEX (NYSE:IEX)), Nuvve (NVVE), and Ayro (AYRO) because they look significantly overvalued at their current price levels. Read on.Electric vehicles (EVs) are expected to dominate the automotive market in the long run as governments worldwide implement several policy measures to support the industry’s growth, primarily to address climate change concerns. According to a SpendEdge report, the EV market is expected to grow at a 20.4% CAGR between 2021 -2025. Nevertheless, the manufacture of EVs has slowed down significantly over the past several months due to the global chip shortage and supply chain issues.
There is speculation that the current semiconductor chip shortage could last for another two years, making the EV industry’s near-term growth prospects look bleak. Indeed, investors’ pessimism in the EV space is evidenced by the Global X Autonomous & Electric Vehicles ETFs’ (DRIV) 2.2% returns over the past month versus the tech-heavy Nasdaq’s 5.5% gains.
Given this backdrop, we believe it is wise to avoid EV stocks Ideanomics, Inc. (IDEX), Nuvve Holding Corp. (NVVE), and Ayro, Inc. (AYRO). Their sky-high valuations are not justified by their weak financials and growth prospects. So, the prices of these stocks could continue declining in the coming months.