The wild ride isn’t over yet for the RC365 Holding (LSE:RCGH) share price. Having rocketed from 25p in mid-June to a closing high of 165p barely a month later, the tech stock is falling again. It was last at 119p per share.
Heavy selling can be common when a share price takes off in a short place of time. It gives an opportunity for those who got in early to book monster profits. Unfortunately those who bought in at the top can stand to lose big money.
So is the party over for RC365 Holding and its share price? Or will the company rush to new record highs before too long?
An exciting tech share
To quickly recap, RC365 is a holding company for Regal Crown Technology Limited. It has two significant attractions to investors: a focus on fast-growing emerging markets, and an opportunity to grow profits rapidly as the world becomes increasingly digitalised.
RC365’s operations are focused on Hong Kong and China, though the company is looking to expand its footprint into Europe. Its core function is to supply payment gateway services that allow online retailers to trade.
With e-commerce poised for further expansion (and especially in Asia) the growth potential here is massive. However, investor excitement over its opportunities in artificial intelligence (AI) is what has turbocharged the share price in recent weeks.
The next big AI stock?
In June, RC365 signed a non-binding agreement with Hatcher Group to collaborate on AI technology. Investors were seemingly blown over by the former penny stock’s vow to harness the full potential of the AI initiative by allowing implementation of automated workflow in its proprietary applications, as well as integration of new features, including blockchain technology and virtual banking facilities.
That dynamic mission statement wasn’t all that ignited the market’s imagination, though. A bullish article/advertisement claiming that investing in the small cap “could be like buying into Apple, Google or Microsoft decades ago” also drummed up excitement.
The article also predicted RC365 could deliver huge returns like Nvidia, another US tech giant whose share price has jumped 227% in 2023 on the back of the AI craze.
The verdict
That’s quite the claim, I’m sure you’d agree. But I’m not going to pour cold water on it. After all, few would have predicted the rise of Amazon when it traded in penny stock territory a couple of decades ago.
But at the same time I don’t plan to buy RC365 shares for my portfolio today. There is still a lot of froth around the stock following that ultra-bullish article. And for every tech stock that becomes a roaring success there are many more than fall by the wayside, leaving investors nursing big holes in their pockets.
For me there are far better ways to try and capitalise on the AI revolution. Microsoft, Nvidia, and Meta, for instance, have made solid early inroads into the sector. And they have the financial clout and the tech know-how to succeed in what should be an ultra-competitive market.
RC365 has a long, long way to go to reach the heights of those tech giants. At the moment I can’t see a strong-enough reason to buy the share, and especially given how volatile its share price is. I think investors would be better off buying other growth stocks today.
