Joby Aviation (JOBY -11.05%) stock is falling in Monday's trading. The flying electric vehicle company's share price was down 10.2% as of 1 p.m. ET.

After an impressive rally, Joby Aviation's valuation is now falling as some investors are betting against the stock. Short-sellers are also placing bets against Joby's competitor Archer Aviation, and its stock is down 23.7% today as of this writing. Even with today's pullback, Joby's share price is still up roughly 65% over the last month.

Short interest on Joby Aviation stock is increasing

As early frontrunners in a speculative emerging industry, Joby Aviation and Archer Aviation have often seen their respective stocks make corresponding moves. In November, Needham published a bullish report on both companies and the broader flying taxi industry. Needham believes that the flying EV market is taking off and that key regulatory approvals will eventually arrive, paving the way for Joby and Archer to make the jump to product commercialization and rapid sales growth.

Needham's bullish coverage helped power explosive gains for Joby and Archer over the last month, but some investors are now betting that both stocks will start coming back down to earth. Short interest on both stocks has been rising, and the uptick in bearish momentum is likely causing other investors to take profits on the heels of massive rallies.

What comes next for Joby Aviation stock?

Over the long term, Joby Aviation's stock performance will be determined by whether or not the company receives regulatory approvals and successfully scales its vehicle production and marketing operations. While the company has a highly growth-dependent and speculative valuation, the outlook on the regulatory front is fairly promising. The company recently completed a test flight in Japan and has received substantial investment from Toyota Motor, and it's also recently been scaling up its operational footprint in Saudi Arabia.

On the other hand, investors should keep in mind that progress toward commercialization could proceed at an uneven pace -- and setbacks could potentially lead to big sell-offs for the stock. Joby's share price will likely continue to be highly volatile in the near term. In addition to fundamental business news and short-selling and short-covering, the company's stock could see big swings in conjunction with coverage from analysts and shifting macroeconomic indicators. Investors should approach the stock with the understanding that it is a high-risk, high-reward play in an emerging product category.