The last couple of years have been a roller-coaster ride for investors. Back in 2022, inflation reached abnormally high levels, which caused the Federal Reserve to pursue an aggressive interest-rate hike strategy. Unsurprisingly, investor enthusiasm waned, and stocks cratered in an epically precipitous fashion.
But as always, the capital markets demonstrated their resiliency last year. Thanks to advancements in hot areas such as artificial intelligence (AI), a booming new spin on the weight loss market in the pharmaceutical sector, and an improving macroeconomic picture, investors gradually adopted a more bullish mindset, and stocks started bouncing back.
This rebound carried into 2024, with the S&P 500 and Nasdaq Composite gaining 23% and 29% so far this year, as of market close on Dec. 18. One thing to be cautious about in a bull market, however, is that some stocks tend to experience upward momentum that may not be fully warranted.
So far this year, shares of electric air taxi manufacturer Archer Aviation (NYSE: ACHR) have soared by 38% — trouncing both the S&P 500 and Nasdaq by a considerable margin.While this may give the illusion that Archer is a no-brainer opportunity, investors should be aware that the company is still very much in its infancy.
In fact, while it’s garnered a lot of attention from big-name brands in the commercial airline industry, Archer remains a pre-revenue operation and is not yet commercially scaling its vehicles. For this reason, I’d argue that much of the gains in Archer stock during 2024 are rooted more in hype and a bullish sentiment surrounding the electric vehicle (EV) more broadly.
Nevertheless, the company just announced what could be a game-changing partnership. Below, I’m going to explore an opportunity that I think is flying under the radar and assess why Archer could emerge as a leader in the long run.
In early December, Archer announced a strategic partnership with defense technology start-up Anduril. Anduril specializes in autonomous systems for the defense system, specifically a series of drones that are meant to be used for reconnaissance missions across land and sea.
Of note is that Archer has already received significant interest from the U.S. military. Given the low noise emissions from EVs, the military could potentially benefit from using Archer’s aircraft during stealth operations.
To me, joining forces with Anduril not only strengthens Archer’s existing footprint in the public sector but also adds a great source of legitimacy surrounding the company’s progress as it eyes commercialization — making a position in the stock quite tempting right now.
