Wolfspeed’s 30% Surge: A Short Squeeze or a Silicon Carbide Breakthrough?

On April 28, 2025, Wolfspeed (NYSE: WOLF) surged over 30% intraday, marking one of the most dramatic moves in the semiconductor sector that year. The stock’s volatility—driven by a mix of short-squeeze dynamics, federal funding hopes, and leadership changes—spotlights the high-risk, high-reward nature of investing in next-gen semiconductor companies. But is this rally a sustainable shift or a fleeting meme-stock moment?

The Catalysts: Short Squeeze, CHIPS Act, and Leadership

The April 28 surge was fueled by three key factors:

1. Short Squeeze Dynamics:
   Wolfspeed’s stock had been heavily shorted, with 41% of its shares outstanding and 64% of its float held by short sellers. By April 2025, margin calls and forced buying from short sellers created a self-reinforcing upward spiral. This dynamic was exacerbated by a $192 million tax refund under the Section 48D advanced manufacturing credit, which bolstered liquidity and signaled fiscal discipline.

1. CHIPS Act Funding Hopes:
   Wolfspeed’s survival hinges on securing $750 million in federal funding under the CHIPS Act. To qualify, it must restructure its $1.1 billion in convertible notes due in 2026 by an October 2025 deadline. Investors speculated that the tax refund and a $1.3 billion cash balance by Q3 2025 would give the company breathing room to meet this goal.

2. Leadership Transition:
   Robert Feurle’s appointment as CEO on May 1, 2025, marked a pivot toward operational rigor. His background at Ams-Osram AG signaled a shift away from aggressive expansion and toward profitability, a move that reassured investors.

Broader Semiconductor Industry Context

The surge occurred amid a sector-wide semiconductor rebound, fueled by AI, EVs, and federal subsidies. Key trends included:
- AI Chip Demand: NVIDIA’s dominance in GPU-driven AI infrastructure and Broadcom’s ascent in networking chips highlighted the industry’s AI-centric trajectory.
- CHIPS Act Funding: U.S. firms like Wolfspeed and Intel raced to secure subsidies, while China’s semiconductor ambitions intensified geopolitical risks.
- Supply Chain Resilience: Post-pandemic shortages eased, but silicon carbide (SiC) overcapacity from competitors like SICC and Tanke Blue threatened Wolfspeed’s margins.

Risks and Red Flags

Despite the surge, Wolfspeed’s fundamentals remain shaky:
- Debt and Liquidity: Its $1.1 billion in convertible notes and negative EBIT margins (-142%) underscore financial fragility. Missing the October restructuring deadline could trigger a liquidity crisis.
- Market Competition: SiC oversupply has doubled global capacity since 2024, pressuring pricing.
- Analyst Skepticism: Mizuho slashed its price target to $2, while Goldman Sachs maintained a “sell” rating, citing execution risks.

What This Means for Investors

The April 28 surge was speculative in nature, driven by short squeezes and CHIPS Act optimism rather than fundamental turnaround. While Wolfspeed’s tax windfall and CEO change offer hope, its path to profitability remains fraught with debt, competition, and regulatory hurdles.

Conclusion

Wolfspeed’s 30% surge was a market reaction to liquidity injections and near-term catalysts, not a sign of sustained growth. The stock’s fate hinges on three critical milestones:
1. Meeting its October 2025 convertible notes restructuring deadline,
2. Securing CHIPS Act funding without equity dilution, and
3. Outpacing SiC overcapacity through cost leadership.

With its stock down 86.5% year-to-date despite the April surge, Wolfspeed remains a high-risk bet. For traders, the volatility offers opportunities, but for investors, the path to long-term success requires navigating a minefield of debt, competition, and geopolitical risks.

In the semiconductor sector, only the companies that master both innovation and execution thrive. Wolfspeed’s story is far from over—but its future depends on turning speculative hope into hard cash.