QuantumScape Corp (NASDAQ: QS) is a battery technology company developing solid-state batteries for electric vehicles, and it currently ranks third among potential breakout AI and tech stocks worth watching.
The stock has fallen 37% so far in 2026, a steep decline that reflects deep investor skepticism about the company’s path to commercial viability.
Short interest sits at 15.36%, indicating that a significant portion of the market is actively betting against the company’s near-term prospects.
Despite that bearish sentiment, 35 hedge funds hold positions in QuantumScape, suggesting institutional investors have not entirely abandoned the long-term thesis.
The core criticism against the company centers on the fact that it has continued producing the same small 5 amp-hour battery cell, a size that is not practical for use in actual electric vehicles.
QuantumScape has been shipping what it calls B and B1 sample cells to partners, but critics argue the company has failed to scale up to the larger, more powerful cells that automakers actually require.
For a company that has raised billions of dollars with the promise of revolutionizing battery technology, the inability to move beyond small prototype cells represents a serious commercial concern.
The company, however, argues that cell size is not the current priority, pointing instead to meaningful progress in manufacturing reliability after upgrading its production process from a system called Raptor to one called Cobra.
The improved process has resulted in fewer defects and faster production, and the company says it has built a pilot manufacturing line called Eagle Line that demonstrates scalability.
The broader investment thesis does not depend on QuantumScape becoming a large-scale battery manufacturer itself, but rather on a licensing and royalty arrangement with Volkswagen’s battery subsidiary, PowerCo.
Volkswagen sold over 50,000 electric vehicles in March alone and holds a significant share of the global EV market, giving the PowerCo partnership substantial commercial weight.
Under the existing arrangement, PowerCo would manufacture QuantumScape’s cells at commercial scale once the technology is ready, with QuantumScape collecting royalties on every cell produced and sold.
That royalty-based model, if it materializes, would allow QuantumScape to benefit from Volkswagen’s manufacturing infrastructure and distribution reach without bearing the capital burden of building large-scale factories itself.
The central question for investors remains whether the underlying solid-state battery technology will prove reliable and scalable enough to move from pilot production into the mass manufacturing environment that a global automaker demands.
