Prices for lidar sensors have dropped significantly within the last several years
Subscribers to Chart of the Week received this commentary on Sunday, March 23.
A few weeks ago I took a look at electric vehicle (EV) stocks, deciphering whether or not it was the right sector to direct your hard-earned cash toward. Ultimately, the conclusion was that EV might be better suited for long-term traders. With tariff tensions still on the forefront of headlines weeks later, it’s no surprise reignited trade woes between the U.S. and China brings into focus yet another market sector.
Technology has been a pressure point of contention for the U.S. and China since the Cold War. Originally pressured by former President Joe Biden’s attempt to kneecap the artificial intelligence (AI) sector during his final bow, Trump tariff threats have been exacerbated by already struggling local Chinese governments, as they fail to maintain notable amounts of tax revenue that would otherwise be reinvested into the economy.
Add in the above stressors alongside a back-and-forth blacklisting by the Pentagon, it’s no shocker that tech specialist Hesai Group (NASDAQ:HSAI) is headed for its sixth drop in eight sessions. The lidar systems manufacturer, a three-dimensional light solution that mostly ranges in self-driving vehicles, is carrying a $2.45 billion market cap on the heels of an inflated 12-month gain of 260%.
Prices for lidar sensors have dropped significantly within the last several years, with its increased output placing the product in about 74% of global robotaxis. One of Hesai’s tactics for fighting tariffs is its plan to open a manufacturing plant overseas, with hopes to "diffuse the risks" of geopolitical tensions, per CFO Andrew Fan. Analysts are buying into the hype as well, with Goldman Sachs citing 2025 as the "take-off year" for lidar technology, and all five in coverage sporting a "buy" or "strong buy" recommendation.
Last seen 5% in Friday’s trading, HSAI has been struggling to recover from its pullback that followed an impressive March 11, post-earnings pop of 50.4%. Quickly brushing off its post-close fourth-quarter earnings miss last week, a 28.3% boost in revenue and lidar partnership with Mercedes-Benz sent the equity to a two-year peak of $24.16. Plus, added support from a trendline that stemming from the stock’s December bottom has halted a number of pullbacks in 2025.
The real kicker for Hesai stock has been short sellers, which have flocked to the equity in droves -- 400% over the past two reporting periods alone. Since touching record low levels back in early 2024, short interest has grown 558%. Per Schaeffer’s Senior Quantitative Analyst Rocky White, recent data shows a huge loss for new short sellers, around 64% at the most current reading, accounting for 3.1% of the stock’s available float -- a volume of $46 million dollars sold short in February. With shorts interest increasing alongside HSAI’s rapidly growing shares, the equity looks ripe for a squeeze. Should this come to fruition, it could trigger more tailwinds, meaning China tech should remain on your radar in the coming months.
The elephant in the room amid tariff turmoil is that many investors are ironically turning their attention overseas. In a Reuters article last week, consider this: "The pressure that the Trump administration is putting on foreign governments... has actually, in a lot of cases, resulted in outperformance from those countries," said Ross Mayfield, a U.S.-based investment strategist at Baird. With China-based equities at attractive valuations, a growth company like HSAI may be the perfect contrarian play.
