Why Wolfspeed Rocketed 27% Higher (Again) on Monday

The stock of wolfspeed (WOLF) surged 27% on Monday, April 28, 2025, fueled by a volatile mix of short-squeeze dynamics, hopes of federal funding, and incremental operational updates. The rally, however, masks deeper risks tied to the company’s precarious financial position and the oversupplied silicon carbide (SiC) market. Here’s why investors should tread carefully.

The Short Squeeze Catalyst

Wolfspeed’s stock volatility began with its status as the most heavily shorted U.S. stock, with short interest reaching 40% of its float. This extreme level created a “short squeeze” scenario: as shares began climbing, short sellers rushed to cover positions, amplifying the upward momentum. The reveals how this metric peaked just before the April surge, driving speculative buying.

Hopes for a Federal Lifeline

The surge was also driven by optimism around the CHIPS Act, a federal initiative aimed at shoring up U.S. semiconductor manufacturing. Wolfspeed stands to receive $750 million in funding under the program—if it can restructure its $1.1 billion in convertible notes due in 2026. Analysts at Morgan Stanley noted that failure to restructure these notes would block access to the first CHIPS Act tranche and increase equity dilution risks. The underscores the critical path to stability.

Tax Refunds and Cash Flow Hopes

Wolfspeed’s $192.1 million tax refund under the Section 48D advanced manufacturing credit—part of an expected $1 billion total over time—boosted liquidity hopes. Combined with reaffirmed third-quarter revenue guidance ($170–$200 million) and non-GAAP loss estimates, the updates temporarily eased investor fears of a near-term cash crunch. The shows how these inflows have stabilized its balance sheet, albeit modestly.

Ask Aime: Why Did Wolfspeed's Stock Surge 27% After a Short Squeeze?

The Risks Lurking Beneath

Despite the rally, Wolfspeed remains in a precarious position. Key risks include:

1. SiC Market Oversupply: Competitors like SICC (SIC) and Tanke Blue have flooded the market, delaying demand recovery. Analysts warn of a potential price war.
2. Convertible Notes Deadline: The 2026 notes restructuring must be finalized by October 2025 to secure CHIPS Act funds. Missing this deadline could trigger a liquidity crisis.
3. EV Adoption Lag: Weak demand for Wolfspeed’s EV components persists due to delayed EV production timelines from automakers.

The Bottom Line: A Speculative Rally, Not a Fundamental Turnaround

Wolfspeed’s 27% surge was a speculative event, not a sign of sustainable strength. The stock remains down 86.5% year-to-date, reflecting its struggles with debt, oversupply, and operational challenges. While the CHIPS Act and tax refunds offer potential lifelines, their execution hinges on high-stakes financial maneuvers.

Investors should note: starkly contrasts its decline with broader market resilience. The company’s fate now depends on restructuring success, CHIPS Act funding, and a rebound in SiC demand—all of which are far from certain.

In short, Monday’s surge was a short-squeeze fueled “meme stock” moment, not a turnaround. For now, Wolfspeed remains a high-risk bet on government support and industry consolidation—two variables that could either save it or send it into bankruptcy.