A massive rally in many electric vehicle (EV)-related names today is leading the tech-heavy Nasdaq higher. Accordingly, among the key stocks in focus in this space continues to be QuantumScape (NASDAQ:QS). At the time of writing, QS stock has surged more than 12% higher, one of the leaders in this red-hot sector today.

There are several reasons for this risk-on rally taking shape today. Various macro catalysts, including the recent jobs data and upcoming consumer price report, have investors bullish on the idea that inflation could be cooling. If that’s the case, higher-beta stocks with greater sensitivity to interest rates could be due for a rally. Additional strength is being attributed to the economic reopening in China, which could boost demand for EVs and batteries over the medium term.

For QuantumScape, this is the sort of narrative that tends to lead to outperformance. Let’s dive into whether this rally can be sustained.

Can QS Stock Continue Its Incredible Move?

Before we jump into this most recent rally, it’s important to keep QuantumScape’s price action in context. Indeed, this is a stock that has had a nice run this year — up nearly 20% at the time of writing. However, this is also a stock that has declined approximately 70% over the past year as well. Thus, it’s going to take quite a few more 12% moves higher for QuantumScape to regain its previous levels.

Perhaps the previous bull market rally we saw, which really ended in 2021, could happen again. After all, it’s a new year.

However, it’s also important to remember that QuantumScape’s solid-state battery technology isn’t ready for commercial production yet. This is a stock that’s going to take a few years to generate anything close to material revenue. It will likely be many additional years until investors see profitability. And in this market, it’s clear that cash flow and capital redistribution to shareholders is the most important thing for many in this market.

Thus, while this bounce is nice, and QS stock is clearly a high-beta way to play this rally, I wouldn’t be surprised to see the rally fizzle at some point. Indeed, if 2022 is our guide, that should be the case. Thus, it’s buyer beware when it comes to higher-risks stocks like this.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.