Exercise caution amid the electric vehicle (EV) hype, as some battery stocks face intense competition and potential price wars. While many project the global EV market will grow significantly, several companies have struggled and experienced stock declines.

The market carries significant uncertainty right now. Fears of an impending recession have not gone away, despite increasing valuations across the board.

Thus, for investors looking to play it safe, here are three overhyped battery stocks to avoid.

QuantumScape (QS)

QuantumScape (NYSE:QS) stock has been on a wild ride of late. Despite some significant momentum earlier this year, shares of QS stock have since settled down. That movement is partly due to a cautious investor base, as concerns build around the company’s long-term prospects. I think future months could be challenging for QS. The stock may face a considerable decline, resembling a “penny stock downfall.”

Solid-state batteries (SSBs) are gaining attention for their potential to be safer, more durable, and potentially less expensive than current lithium-ion batteries. The recent announcement by Toyota (NYSE:TM) to develop its own solid-state batteries for electric vehicles initially seemed like positive news for QuantumScape stock.

However, I had a different perspective, believing that Toyota’s entry into the solid-state battery market could hinder QuantumScape’s future growth. It appears that market participants are now leaning towards a similar conclusion.

Regardless of the outcome, QuantumScape shares may continue to face challenges after experiencing significant declines. If QS fails to make further advancements in bringing SSBs to market, its stock could potentially plummet to extremely low levels. However, even if the company achieves success in mass-producing SSBs, it would not guarantee a substantial recovery in the stock’s value.

Nikola (NKLA)

Nikola (NASDAQ:NKLA) is a company many consider to be a pure play on EV vehicles. An early-stage EV stock, Nikola is risky in its own right. However, the company’s acquisition of Romeo Power last year has also positioned the company as a player in the battery space. However, that is one deal, and I don’t think it will pay off for investors.

Romeo has lacked the strong industry partnerships that peers have benefited from. Nikola has been Romeo’s main customer but has also faced financial difficulties and has delivered only a nominal quantity of trucks to date.

Unlike QuantumScape’s solid-state batteries, Romeo Power’s batteries do not possess the same advantages, such as non-flammability. Moreover, Romeo’s batteries are primarily intended for commercial vehicles, which explains Nikola’s interest in the company. However, limited information is available about the specific technology used in Romeo Power’s batteries.

Nikola is a company I’m cautious of right now, and this stock is simply too speculative for my blood. While some investors may consider this company investment-worthy or as a way to play a surge in interest around EVs and battery technology, I believe there are better ways to play the space right now.

Solid Power (SLDP)

Solid Power (NASDAQ:SLDP) is a battery business focused on developing solid-state battery technology. Although its share price has declined since going public, the company’s innovative technology holds significant potential.

Solid Power stands out as a penny stock with significant growth potential. The company is working towards commercializing solid-state batteries, which have the potential to soar in value in the coming years. These “forever batteries” offer improved safety and effectiveness compared to lithium-ion batteries.

However, with a market capitalization of $1.3 billion, Solid Power falls in the mid-sized range, indicating the presence of institutional investors in its share registry. While institutional investors are typically considered reliable, it’s important to remember that they can also make poor investment decisions, similar to any other investor. If several institutions simultaneously change their outlook on a stock, it can lead to a rapid decline in share price.

On the date of publication, Chris MacDonald did not hold (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.