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3. QuantumScape Corp (NASDAQ:QS)

Number of Hedge Fund Investors: 35

QuantumScape Corp (NASDAQ:QS) is a battery technology company developing solid-state batteries for electric vehicles. The stock has plummeted 37% so far this year, with retail investors believing it could break out once the company actually starts producing batteries commercially. However, the stock carries heavy short interest at 15.36%, meaning a lot of investors are betting against it.

The bear case is straightforward: QuantumScape (NASDAQ:QS) has been making the same tiny 5 amp-hour battery cell for years. That’s small. Like, not useful for actual cars. The company keeps shipping these B and B1 sample cells to partners, but it never scales up to bigger, more powerful versions that vehicles actually need. For a stock that’s raised billions to revolutionize battery tech, that’s a real problem.

But the company says the cell size doesn’t matter yet. What matters is they figured out how to actually make these cells reliably. They upgraded their manufacturing process from something called Raptor to Cobra. The separator—the internal layer that keeps battery parts from touching—works way better now. Fewer defects. Faster production. They built a pilot line called Eagle Line and proved they can scale it up.

Then there’s Volkswagen. VW sold over 50,000 electric vehicles in March alone and owns huge chunks of the EV market globally. The company’s battery subsidiary, PowerCo, has a deal to manufacture QuantumScape’s cells at actual commercial scale once they work. QuantumScape gets royalties on every cell sold.

So the bet isn’t that QuantumScape becomes a battery factory. The bet is that the technology works, Volkswagen handles manufacturing and distribution, and QuantumScape collects royalties.