Lithium stocks have slumped, but Tencap's Jun Bei Liu says the recovery could be closer than investors think, and has a stock picked that couldbe the first to benefit.

What happened to lithium stocks?

Lithium was once the market’s golden child. Surging demand for electric vehicles sent prices soaring, and investors piled into miners with exposure to the so-called “white gold.” Everyone from carmakers to governments were forecasting exponential growth in battery metals, and lithium was right at the heart of it.

But the hype didn’t last. As new supply flooded the market and EV demand slowed in key regions, prices collapsed. Investors who jumped in late have been burned. According to Jun Bei Liu, speaking on this week's Switzer Investing TV,  lithium’s path has been anything but smooth. 

In her words, prices have been “going up, going down, going up and going down,” with China playing a major role in the swings.

Why Jun Bei Liu thinks a turnaround is coming

But Jun Bei Liu believes lithium’s worst days might be behind it.

While prices are still low, she sees early signs of a recovery forming, particularly in the supply side of the equation. “In China, they keep shutting down a lot of those mines because they did not license properly,” she told Switzer Investing TV. “So China’s trying to actually stabilise the lithium price.”

That regulatory crackdown could help balance an oversupplied market. At the same time, Liu believes demand has quietly been improving after a temporary lull. EV penetration is still climbing globally, and governments are doubling down on electrification targets. But sentiment hasn’t caught up.

“Lithium feels a little bit like uranium did a few years ago,” she said. “There’s strong demand, but the price needs to catch up.”

Why Core Lithium is the ‘easy play’

Jun Bei Liu isn’t holding lithium miners in her fund right now, but if she were to buy one, it would be Core Lithium (ASX:CXO).

“It’s the easiest one to buy,” she said, pointing to the company’s strong balance sheet, with “heaps of cash sitting on it,” and its high leverage to any price recovery. That combination of cash backing and upside potential makes it a cleaner bet than smaller or more speculative names.

She also noted the technical setup: “20% of the register is still short,” she said, a sign that sentiment is still deeply negative, but also a possible catalyst if things start to turn. Short squeezes can be violent, and Core is well-positioned to benefit from even a modest recovery in lithium pricing.

What investors should watch for next

For lithium stocks to run again, a few key things need to fall into place.

First, supply discipline is critical. Jun Bei Liu pointed to mine shutdowns in China as a good start, particularly where operations weren’t licensed properly, but more may be needed to remove the glut that’s weighed on prices.

Second, the lithium price needs to stabilise. That doesn’t mean it has to spike. In fact, Liu believes many of the better-capitalised miners, like Core Lithium, don’t need much of a price lift to return to profitability. “You don’t need much movement, they will make good money,” she said.

For investors, this means patience. The demand story is intact, but the market needs a clearer supply signal and a firmer pricing floor. When that comes, the move could be fast, and Jun Bei Liu sees it playing out much like uranium: a sector ignored by most, until the fundamentals became too strong to ignore.

Her advice? Don’t rush, but don’t switch off either.