Wolfspeed Shares Plunge on Manufacturing Setbacks

Investors delivered a harsh verdict on Wolfspeed last week, sending its stock price tumbling after the company disclosed significant delays in a crucial manufacturing transition. The sell-off, which began in pre-market trading on Thursday, December 12, saw shares drop over 7% and extend losses into Friday’s session.

The catalyst was an operational update that has reignited long-standing investor concerns. At the heart of the issue is the company's ongoing struggle to scale production of its silicon carbide (SiC) wafers. Specifically, Wolfspeed is again pushing back the timeline for transitioning to 200-millimeter wafers, a size considered essential for cost-effective, high-volume manufacturing.

Key pressure points highlighted by the market include:
* Repeated postponements of the 200mm production ramp-up
* Renewed uncertainty surrounding cost management during the manufacturing scale-up
* A market perception that near-term execution risks now overshadow long-term growth potential

When markets opened on Friday, the stock gapped down and failed to reclaim the $21 level. Elevated trading volume indicated that institutional investors are prioritizing current production challenges over future promises.

The negative reaction is particularly striking given recent positive news. Just days earlier, on December 9, Wolfspeed announced a significant supply agreement with Toyota. The deal will see Wolfspeed’s automotive MOSFETs used in the onboard charging systems of Toyota’s electric vehicles.

Should investors sell immediately? Or is it worth buying Wolfspeed?

Ordinarily, validation from a top-tier automaker would provide durable support for a company's share price. In this instance, however, the market has largely ignored the long-term strategic signal. The message from investors appears clear: while demand and orders exist, there is growing skepticism about Wolfspeed's ability to fulfill them profitably and on schedule.

Financial Cushion Proves Insufficient for Momentum

The recent weakness also dashes hopes raised at the start of the month. On December 1, Wolfspeed received a tax refund of $698.6 million from the U.S. Treasury under the CHIPS and Science Act. This injection boosted the company’s total liquidity to approximately $1.5 billion.

While this financial bridge eliminates the acute bankruptcy risk that weighed on the stock throughout 2024, the events of the past week demonstrate that solvency alone is not enough to drive share price appreciation.

Market Adopts a "Show Me" Stance

Analysts and investors are now embodying a classic "show me" attitude. Although the financial foundation has been shored up, operational ceilings are being lowered by persistent delays. Several factors continue to pressure the valuation:

• Sector Discipline: The semiconductor sector is known for punishing capital-intensive firms that miss critical technical milestones.
• Cautious Analyst Sentiment: Ratings remain mixed to negative, with consensus price targets suggesting further downside potential.
• Elevated Volatility: Options pricing implies continued high volatility, with traders anticipating significant price swings in the week ahead.

The central question for Wolfspeed has now shifted. It is no longer "Will Wolfspeed survive?" but rather "Can Wolfspeed execute?" Until management provides concrete evidence that its 200-millimeter production targets are back on track, the stock is likely to remain vulnerable—despite its strengthened balance sheet and the landmark Toyota agreement.