QuantumScape: QS Stock To $0?

Forbes

5 days ago

CHONGQING, CHINA - JULY 19: In this photo illustration, a smartphone displays the logo of ... More QuantumScape Corporation (NYSE: QS), a solid-state battery technology company focused on the development of next-generation energy storage solutions for electric vehicles, in front of a screen showing the company's latest stock market chart on July 19, 2025 in Chongqing, China. (Photo illustration by)
While QuantumScape's recent Cobra separator breakthrough has ignited significant investor enthusiasm, it's crucial to acknowledge that multiple pathways could still lead to complete value destruction, despite the promising technical progress.
In our previous analysis of QS stock, we explored the bull case scenario and its upside potential. This note, however, focuses on the potential downside scenarios that investors should consider. That said, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception. Also, see – Time To Buy Centene Stock?
Cash Burn
QuantumScape's financial position poses an immediate existential threat. With a trailing 12-month free cash burn rate of $331 million and operating cash burn of $277 million, the company faces a potential liquidity crisis. The original SPAC presentation's 2025 revenue projection of $39 million now appears overly optimistic, and a pattern of missed financial milestones suggests that current cash runway calculations may also be unrealistic.
Technology Risk
The landscape of next-generation battery technologies is shifting, with silicon anodes potentially bypassing solid-state solutions entirely. Industry experts are increasingly questioning the commercial viability of solid-state batteries, with some noting "the hype around solid-state batteries is fading." (CNBC) If alternative technologies like those from Amprius Technologies, Enovix, and Enevate achieve market success first, QuantumScape's decade-long investment could become worthless.
Manufacturing Issues
Scaling ceramics production to gigawatt-hour levels has historically proven challenging for many startups. QuantumScape must simultaneously master materials science, precision manufacturing, quality control, and supply chain management while maintaining cost competitiveness. The Cobra process addresses only one component of this complex ecosystem, meaning a single critical failure in any area could derail commercialization.
Competitive Risk
Well-funded competitors like Toyota, Samsung, LG Chem, and Solid Power (backed by BMW and Ford) possess decisive advantages. Their established manufacturing capabilities, automotive relationships, and financial resources dwarf QuantumScape's, allowing them longer development timelines and multiple technology bets. Early market entry by any rival could establish dominant positions.
Partnership Dependency
QuantumScape's survival critically depends on its relationship with PowerCo/Volkswagen. Any strategic shift, financial pressure, or technology pivot by Volkswagen could eliminate QuantumScape's primary commercialization pathway. Automotive partnerships are notoriously volatile for unproven technologies, and losing this relationship would devastate market access and damage credibility for attracting new partners.
For example. Magna and Lyft had a collaboration in self-driving vehicle technology that eventually ended. The intense R&D costs and the prolonged timeline to commercialization for fully autonomous vehicles have made many such partnerships challenging. Similarly, the partnership between Volvo Cars and Veoneer autonomous driving technology also concluded. Developing safe and reliable autonomous systems at scale is incredibly complex and expensive, leading to shifting strategies and dissolved alliances.
The Dilution Spiral
Continued cash burn could necessitate further capital raises, leading to ongoing share dilution through mechanisms like at-the-market offerings. This gradual increase in shares outstanding could significantly diminish the value for existing shareholders. For perspective, QuantumScape's shares outstanding have increased from around 410 million in 2021 to 521 million now. Should capital market access tighten during a funding crisis, the company faces bankruptcy, even if its technology progresses.
Takeaway
QuantumScape's nature is binary: either revolutionary success or complete failure. Moderate outcomes are unlikely. The stock could reach zero due to cash exhaustion, technology obsolescence, competitive defeat, partnership collapse, or market timing failure. While the Cobra breakthrough is genuine progress, it may not be enough to overcome these fundamental survival challenges. This note, of course, focuses purely on potential downside scenarios and risks. However, there is also an upside scenario with 40x potential.
QuantumScape emphasizes the critical importance of a diversified investment strategy over concentrated bets on high-risk ventures. We apply a risk assessment framework while constructing Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.