Wolfspeed's Stock Plummets Nearly 50% to a 27-Year Low

In a shocking turn of events, Wolfspeed's shares plummeted approximately 48% on Friday, reaching their lowest point since 1998. This dramatic decline comes just a day after the semiconductor company announced the appointment of Robert Feurle as its new CEO, effective May 1, following the sudden dismissal of previous CEO Gregg Lowe in November without any stated cause.

Wolfspeed has been struggling significantly due to declining demand from its automotive customers, which has severely impacted its profitability. In a stark acknowledgment of its challenges, the company revealed in November that it was closing a 50mm device fabrication plant in Durham, North Carolina, and would be laying off about 20% of its workforce.

Adding to its woes, Wolfspeed is currently awaiting approximately $750 million in federal funding under the U.S. CHIPS Act. This landmark legislation, passed in 2022, promised $52.7 billion in subsidies aimed at bolstering domestic semiconductor manufacturing. However, tensions have escalated over the future of this funding. Earlier this month, former President Donald Trump called on U.S. lawmakers to abolish the CHIPS Act, instead suggesting that those funds should be used to address national debt.

Brooks Idlet, a senior analyst at CFRA Research, expressed concerns regarding the future of Wolfspeed in light of the uncertainty surrounding the CHIPS Act funding. "Wolfspeed's CHIPS Act grant is the highest-dollar grant that has not been officially awarded before the Biden administration takes office, leaving it particularly exposed," Idlet stated. He further argued that not receiving this grant could be catastrophic for the company, potentially leading to severe restructuring to maintain financial stability.

The CHIPS Act is particularly crucial for Wolfspeed as it aims to expand its silicon carbide semiconductor manufacturing capabilities. The recent drop in stock price saw shares trading at a mere $2.81, marking a staggering loss of over 59% in value for the year.

Market trends suggest a lack of confidence in the company's stock, with estimates from Ortex indicating that around 32.5% of Wolfspeed's free float was being shorted as of March 27. A high short interest typically signals that investors anticipate further declines in stock value, adding more pressure to an already beleaguered company.

As Wolfspeed navigates these tumultuous waters, investors are left wondering: Can the newly appointed CEO bring the necessary changes to turn the tide for this once-promising chipmaker? Only time will tell if Wolfspeed can reclaim its position in the semiconductor market or if this decline is just the beginning of a more protracted struggle.