The battery sector is fascinating for investors as producers, recyclers, and developers look to capitalize on the growing demand for batteries. Since the popularity stems from the demand for lithium batteries used in electric vehicles (EVs), the surges and falls of battery stock prices reflect worldwide consumer interest in EVs quite well. 

While many companies benefit from the demand, the market remains volatile, and companies that have not found solid footing are on shaky ground. These three battery stocks have fluctuating demand and are at serious risk of dropping in price.

We’ll cover the products and technology these companies offer and the evidence that gives us reason to worry about the future safety of these stocks.

Nikola (NKLA)

Nikola (NASDAQ:NKLA) is an EV producer still in its beginning phases, accompanied by the unavoidable risks of a new company. The company’s questionable investments in the battery sector make this stock a risky investment. 

Nikola completed its acquisition of the battery producer Romeo Power in late 2022. Romeo Power meets Nikola’s need for commercial EV batteries, but its batteries do not meet industry standards set by other battery producers. For example, in 2023, Nikola discovered that the Romeo Power Hermes and Legion batteries used by Nikola had significant defects. 

Given Nikola’s limited customer base, setbacks like the ones caused by the batteries are significant. The performance of Nikola’s trucks that employ these batteries is questionable, along with Nikola’s growth potential. The company raised $230.3 million in cash at the end of Q4 last year but has not shown a significant sign of sales for its vehicles or batteries.

While Nikola has a promising hydrogen energy technology partnership with FirstElement, the company shows limited growth. As it stands right now, Nikola does not have batteries that can compete with industry giants and a relatively small customer base, and investors may want to avoid the uncertainty surrounding the stock.

Li-Cycle (LICY)

Despite bringing its eco-friendly mission to life as a battery-recycling company, Li-Cycle (NYSE:LICY) has not attracted the business required to sustain its pricey operations. The expensive operating costs resulted in a net loss of $138 million in Q4 despite a 34% increase in revenue from product sales.

Li-Cycle received a $75 million investment from Glencore (OTCMKTS:GLNCY) this year and has a conditional $375 million contract with the U.S. Department of Energy. Usually, the large influx of cash would mean an exciting growth opportunity for Li-Cycle, but the company’s spending remains at an all-time high, reaching $334.9 million in capital expenditures for 2023.

The volatility and uncertainty of the lithium battery market also create uncertainty in Li-Cycle’s supply line. The drop in lithium prices earlier this year took its toll on Li-Cycle’s stock price. The stock saw a slight jump following the recent cash influx but has tumbled again due to the company’s shaky financial sustainability concerns.

Li-Cycle may have potential with backing from companies and government agencies seeking eco-friendly solutions. However, as the company stands, investors should be wary of the unstable ground and market conditions before holding too many shares.

QuantumScape (QS)

QuantumScape (NYSE:QS) is a solid-state battery producer with a checkered reputation, including a class action lawsuit against the company a few years ago. Te company claimed to have overcome the shortcomings that solid-state batteries faced on their way to becoming sold mainstream. However, the company’s tech has still not proven sustainable enough to supply to the market. 

The stock has plummeted around 95% since 2020, and the company’s most recent earnings report included a net loss of $120.6 million for Q1 this year. The guidance for this year also includes adjusted EBITDA loss set to be between $250 million and $300 million. 

There is not much hope in sight for QuantumScape in the near future, and investors still holding out hope that its solid-state technology should cut their losses for now.

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On the date of publication, Joel Lim did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.