Wolfspeed's Silicon Carbide Gamble: Can Bankruptcy Restructuring and CHIPS Act Funds Turn the Tide?

Wolfspeed (NYSE: WOLF), a pioneer in silicon carbide (SiC) semiconductors, stands at a pivotal crossroads. After years of heavy debt, operational challenges, and a stock price collapse that erased 98% of its value, the company has entered a pre-packaged Chapter 11 restructuring. Its survival hinges on a delicate balance of financial restructuring, government subsidies, and the growing demand for SiC in electric vehicles (EVs), renewable energy, and advanced manufacturing. This article explores whether Wolfspeed can leverage the CHIPS Act's funding and industry tailwinds to emerge as a leader in the $30 billion SiC market—or if its struggles mark an irreversible decline.

The Bankruptcy Restructuring: A Necessary Reset

Wolfspeed's financial woes are well documented. As of March 2025, the company carried $6.7 billion in debt, with a net loss of $285.5 million in Q3 2025. To address this, its pre-packaged Chapter 11 plan aims to slash debt by 70% ($4.6 billion) and reduce annual interest payments by 60%. Key lenders, including Renesas Electronics (which holds a $2.07 billion claim), have agreed to convert $5.2 billion of existing convertible notes into equity and warrants. This restructuring, if completed by Q3 2025, would leave Wolfspeed with $500 million in new notes, $1.3 billion in cash, and access to a $600 million tax refund pipeline.

The move is starkly necessary. shows a catastrophic decline from $60 in late 2022 to $0.90 in June 2025—a reflection of investor skepticism. However, the restructuring also carries risks. A 20% workforce reduction and delays at its Mohawk Valley Fab (Utica, NY) highlight execution challenges. If Wolfspeed fails to meet its exit timeline, it could face further liquidity strains.

The CHIPS Act: A Lifeline or a Mirage?

Wolfspeed's future is deeply tied to the $750 million grant it has negotiated under the CHIPS and Science Act—a non-binding agreement finalized in October 2024. The funds, contingent on meeting operational milestones, would support its $5 billion expansion to build the world's largest 200mm SiC manufacturing footprint in North Carolina and New York. Combined with a $750 million private financing round and $1 billion in Section 48D tax refunds, Wolfspeed expects $2.5 billion in total capital by 2026.

However, uncertainty looms. The Trump administration's scrutiny of CHIPS Act awards could delay disbursements, and Wolfspeed must navigate complex terms, including deferring $120 million in interest payments and securing $300 million in non-debt capital within a year. shows Wolfspeed's modest progress: its Mohawk Valley Fab contributed $78 million in Q3 2025, up from $28 million in 2024, but this pales against Intel's $20 billion in annual revenue.

Industry Tailwinds: Silicon Carbide's Explosive Potential

The semiconductor industry's shift to SiC is undeniable. Unlike traditional silicon, SiC enables smaller, more efficient power systems, critical for EVs, solar inverters, and AI data centers. The market is projected to grow at 20% CAGR through 2030, with Tesla, BMW, and Ford all ramping up SiC adoption in next-gen EVs.

Wolfspeed's leadership in this space is its strongest asset. It holds over 30% of the global SiC market and counts Renault, General Motors, and Siemens among its clients. The Mohawk Valley Fab, once fully operational, could boost its SiC wafer capacity by 30x, solidifying its position against competitors like STMicroelectronics and Infineon.

Risks to Consider

• Political and Regulatory Hurdles: The CHIPS Act's funding remains contingent on federal approval, and shifting U.S. administrations could alter subsidy priorities.
• Execution Risks: Delays at the Mohawk Valley Fab (currently underutilized due to start-up costs) and labor cuts could disrupt supply chains.
• Competition: Asian manufacturers (e.g., Rohm, Onsemi) are scaling SiC production aggressively, squeezing margins.

Investment Thesis: A High-Risk, High-Reward Gamble

Wolfspeed's stock trades at $0.90—98% below its 2022 peak—reflecting extreme pessimism. The company's restructuring and CHIPS Act grants offer a path to survival, but success requires flawless execution. If Wolfspeed exits bankruptcy by Q3 2025 and secures its $750 million grant, its valuation could rebound sharply. A bull case assumes $5 billion in revenue by 2030, valuing the company at $20–$30 per share.

However, risks are acute. A failure to meet milestones, a loss of CHIPS funding, or a slowdown in EV demand could trigger further declines. For now, Wolfspeed is a speculative buy for investors with a long-term horizon and tolerance for volatility.

Final Verdict

Wolfspeed's turnaround hinges on three pillars: a swift exit from bankruptcy, seamless integration of CHIPS Act funds, and sustained demand for SiC in EVs and renewables. While the odds are stacked against it, the company's technological leadership and strategic partnerships give it a fighting chance. For the semiconductor sector's long game, Wolfspeed is a story worth watching—but tread carefully.