Wolfspeed Inc. (NYSE: WOLF) saw its stock plummet by more than 40% on March 28, 2025, amid swirling rumors regarding the potential loss of critical funding from the CHIPs Act. This North Carolina-based silicon carbide supplier, which had been poised to receive $1.5 billion to bolster its operations, is now facing significant financial uncertainty.
The company's stock drop is particularly stark, as it reached its lowest point since 1998, with shares trading around $3.33. This dramatic decline followed the announcement of Robert Feurle as the new CEO, effective May 1, 2025, after the abrupt departure of former CEO Gregg Lowe in November 2024.
Wolfspeed's challenges are compounded by a notable decrease in demand from automotive clients, which has adversely affected its profitability. According to reports, the company had previously disclosed plans to lay off 20% of its workforce and had shut down a 50mm device fabrication plant in Durham, North Carolina, in response to dwindling orders.
As the semiconductor industry grapples with fluctuating market conditions, Wolfspeed's reliance on federal funding under the CHIPs Act has become increasingly precarious. This bipartisan legislation, enacted in 2022, was designed to support domestic semiconductor manufacturing with a promised $52.7 billion in subsidies. However, recent comments from former President Donald Trump suggested that lawmakers should consider abolishing the CHIPs Act and redirecting its funds to reduce the national debt. Such a move could jeopardize the approximately $750 million in funding Wolfspeed is awaiting.
Analysts have been closely monitoring Wolfspeed's stock performance, and despite the current turmoil, there are indications of potential recovery. Based on the one-year price targets from 14 analysts, the average target price for Wolfspeed is estimated at $11.07, with a high of $30.34 and a low of $5.00. This projection implies a possible upside of 233.06% from the current trading price.
The consensus recommendation from 17 brokerage firms currently stands at an average of 3.0, indicating a “Hold” status for the stock. This rating suggests that while there may be potential for growth, caution is advised given the current market volatility.
Furthermore, GuruFocus estimates the fair value of Wolfspeed's stock at $55.81 in one year, indicating a staggering upside of 1578.5% from its current price. This estimate is calculated based on historical trading multiples, past business growth, and future performance predictions.
In light of these developments, Wolfspeed's future remains uncertain. The company must navigate the dual challenges of declining demand in the automotive sector and the potential withdrawal of federal support. As Robert Feurle steps into his role as CEO, he faces the daunting task of steering the company towards profitability while addressing the concerns of investors and analysts alike.
The semiconductor industry is notoriously cyclical, and Wolfspeed's recent struggles reflect broader trends affecting many companies in this space. As the market adjusts to changing demand and regulatory environments, investors are left wondering whether Wolfspeed can recover from this setback.
In conclusion, while Wolfspeed's stock has taken a significant hit, the potential for recovery exists, contingent upon the company’s ability to adapt to market conditions and secure necessary funding. With a new CEO at the helm and a focus on expanding its silicon carbide semiconductor manufacturing, the company may still find a path forward in the evolving landscape of the semiconductor industry.
