Wolfspeed’s stock price plummeted nearly 50% following the appointment of a new CEO and increasing uncertainty surrounding its eligibility for federal funding under the U.S. CHIPS Act, raising concerns about the company’s future.
Shares of Wolfspeed (WOLF) experienced a dramatic decline of approximately 48% on Friday, reaching their lowest level since 1998. This plunge follows the company’s announcement on Thursday of Robert Feurle as its new CEO, effective May 1st, after Gregg Lowe was ousted in November.
Wolfspeed has been struggling with a slowdown in demand from automotive customers, impacting its profitability. In November, the company announced the closure of a 50mm device fabrication plant in Durham, North Carolina, and plans to lay off 20% of its employees.
Adding to the company’s woes is the uncertainty surrounding approximately $750 million in federal funding it expects to receive under the U.S. CHIPS Act. The landmark 2022 bipartisan law allocated $52.7 billion in subsidies for domestic semiconductor manufacturing and production.
However, earlier this month, President Donald Trump suggested that U.S. lawmakers should eliminate the law and use the proceeds to pay down debt.
According to Brooks Idlet, senior analyst at CFRA Research, “Wolfspeed’s CHIPS Act grant ended up being the highest-dollar CHIPS grant to not be officially awarded before Biden’s exit, leaving it particularly vulnerable to being pulled under the new administration.”
Idlet warned that not receiving the grant “would be devastating for Wolfspeed, likely necessitating a substantial restructuring in order to preserve cash.” The CHIPS Act funding is considered crucial for Wolfspeed’s silicon carbide semiconductor manufacturing expansion.
Shares of Wolfspeed were last trading at $2.81. The stock has lost more than 59% of its value this year.
Data from Ortex indicates that approximately 32.5% of Wolfspeed’s free float was in a short position as of March 27, suggesting that many investors anticipate further decline in the stock price.