Wolfspeed Faces Challenges Amid Promising Future in Semiconductor Market
Wolfspeed (NYSE: WOLF) has struggled to fulfill the expectations set by its name, with shares plummeting by an astonishing 85% in 2024. This decline came as a result of disappointing financial results and setbacks in its growth objectives.
Despite these setbacks, investors should take a closer look at Wolfspeed’s potential. The company appears poised for growth, backed by improved production capacity and better cash flow management, which could signal a brighter future.
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Could Wolfspeed become an attractive investment in 2025? Here are the key details to consider.
Leading the Charge in Semiconductor Technology
Wolfspeed stands out as a top manufacturer of wide-bandgap semiconductors, focusing on devices such as MOSFETs (a type of electronic device regulating electricity flow) and diodes made from silicon carbide (SiC).
This advanced material boasts superior electrical properties compared to traditional silicon, allowing it to function effectively in extreme temperatures and voltages. Such features make it essential for new technologies, including fast-charging electric vehicles (EVs), next-generation energy storage, and renewable energy applications.
Although competitors like STMicroelectronics and Infineon Technologies are also in the SiC market, Wolfspeed is leading the transition to 200 millimeter (mm) wafers, which enhances efficiency over the older 150mm systems. The SiC market is projected to experience significant growth in the next ten years.
Securing Funding Through the CHIPS Act
In 2024, a pivotal moment for Wolfspeed came with a $750 million grant from the U.S. Department of Commerce through the CHIPS Act, aimed at boosting domestic semiconductor production.
This funding, contingent upon meeting specific milestones, was matched by another $750 million from a major investor group. This financial backing enables Wolfspeed to expand its facility in New York and construct a dedicated SiC site in North Carolina, which is set to become operational this year.
With full production, the company anticipates reaching $3 billion in revenue from its 200mm wafer capacity. This potential, compared to Wolfspeed’s $807 million revenue in 2024, highlights the investment appeal of Wolfspeed as it may be at the beginning of a growth phase.
Image source: Getty Images.
Profitability Remains a Challenge
Navigating slower-than-expected demand has proven difficult for Wolfspeed, particularly in the industrial and energy sectors.
While the electric vehicle market offers promising growth, with more manufacturers integrating Wolfspeed’s SiC powertrain solutions, overall performance has not met earlier projections, leading to a decline in stock prices.
In the first quarter of fiscal 2025, which ended September 29, Wolfspeed reported a slight 1% drop in total revenue and a larger operating loss due to heavy investments in facility construction. The company emphasized $11 billion in design wins as a sign of operational success and ongoing positive expectations for the long term.
However, analysts remain cautious, with predictions pointing to a 2.2% revenue decrease and a wider loss in 2025 compared to the previous year. This anticipated decline is attributed to the new 200mm facility’s slower ramp-up, which may offset losses from the closure of its 150mm plant.
Looking ahead to 2026, forecasts show improvement, with revenue expected to reach $1.2 billion—indicative of a 49% growth rate—although another year of negative earnings per share (EPS) is anticipated, suggesting a recovery is on the horizon.
| Metric | 2025 Estimate | 2026 Estimate |
|---|---|---|
| Revenue | $789 million | $1.2 billion |
| Revenue growth (YOY) | (2.2%) | 48.7% |
| Earnings per share (EPS) | ($3.49) | ($2.20) |
| EPS growth (YOY) | N/A | N/A |
Data source: Yahoo Finance. YOY = year over year.
My 2025 Prediction for Wolfspeed
Wolfspeed shares are near their 52-week low, with a forward price-to-sales (P/S) ratio around 1. Investors who trust the company’s ability to implement its long-term strategy might find the current stock price appealing for a small investment, hoping for potential recovery.
However, I remain cautious and see limited reasons to confidently buy the stock at this stage due to ongoing uncertainties. My outlook is that Wolfspeed’s stock will continue to experience volatility until there are clear signs of stronger demand and enhanced growth. Ultimately, I believe better investment opportunities exist elsewhere in the market.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
