Wolfspeed's Strategic Contract with General Motors: A Catalyst for EV Supply Chain Optimism

In the volatile world of electric vehicle (EV) supply chains, Wolfspeed (WOLF) has emerged as a standout story. Over the past week, the stock surged over 100%, driven by a confluence of strategic developments. While much of the media spotlight has focused on the appointment of Gregor van Issum as CFO and the U.S.-Japan trade deal, a deeper catalyst is reshaping investor sentiment: a landmark $2 billion supply agreement with General Motors (GM), a contract that positions Wolfspeed at the forefront of the EV revolution.

The GM Contract: A Game Changer for Wolfspeed

General Motors has inked a 10-year deal with Wolfspeed to supply silicon carbide (SiC) wafers for its next-generation Ultium Drive units. This agreement marks GM's first large-scale adoption of SiC technology, a material known for its superior energy efficiency and power density. By integrating Wolfspeed's SiC into its integrated power electronics, GM aims to extend EV range by up to 15% while reducing weight and conserving space in vehicles. For Wolfspeed, this contract validates its vertically integrated SiC production model, which controls the entire value chain from raw materials to finished devices—a stark contrast to competitors like STMicroelectronics and Infineon, who rely on older 150mm wafer technology.

The significance of this partnership lies in its scale and scope. Wolfspeed's Mohawk Valley fabrication facility, the world's largest SiC production site, will produce 150mm wafers for GM, with plans to transition to 200mm wafers as the facility scales. This ensures a domestic, secure supply chain for GM, aligning with U.S. policy priorities to reduce reliance on foreign semiconductor manufacturing. Analysts estimate that the GM contract alone could contribute $150–$200 million annually to Wolfspeed's revenue by 2026, a critical boost as the company navigates its Chapter 11 restructuring.

Investor Sentiment: From Skepticism to Optimism

The contract has recalibrated investor perceptions of Wolfspeed, shifting the narrative from a struggling bankruptcy candidate to a pivotal player in the EV supply chain. Historically, Wolfspeed's stock has been viewed as speculative due to its $4.6 billion debt load and the risk of delisting. However, the GM deal—alongside a $2 billion supply agreement with Renesas Electronics—demonstrates the company's ability to secure long-term, high-margin contracts. These partnerships underscore Wolfspeed's technological leadership in SiC, a material expected to grow from a $2.3 billion market in 2024 to $20 billion by 2030.

The U.S.-Japan trade deal further amplifies this optimism. By reducing tariffs on Japanese goods and incentivizing U.S. investment, the agreement supports Renesas' production of SiC-based semiconductors for EVs, creating a virtuous cycle for Wolfspeed. Investors are now factoring in the potential for Wolfspeed to secure additional contracts with automakers like Jaguar Land Rover, which is also adopting its SiC technology for its Reimagine strategy.

Restructuring as a Foundation for Growth

While the GM contract is a clear win, Wolfspeed's restructuring efforts are equally critical. Supported by 97% of senior secured noteholders, the company's Chapter 11 plan aims to reduce debt by 70% and cut interest payments by 60%, freeing up capital for R&D and production. This restructuring, expected to conclude by late Q3 2025, has already attracted $275 million in new financing and a $250 million debt paydown at a premium. The resulting leaner balance sheet will enable Wolfspeed to accelerate its 200mm wafer transition, a move that could further differentiate its offerings in a market where Chinese competitors like TankeBlue are gaining ground.

Risks and Realities

Despite the positive momentum, risks remain. Wolfspeed's equity holders will retain only 3–5% of the reorganized company, and the stock's volatility reflects ongoing uncertainty. A delisting to the OTC market could trigger further sell-offs, particularly if the restructuring timeline slips. Additionally, the company's reliance on a single customer (GM accounts for 30% of its near-term revenue) introduces concentration risk.

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

For investors willing to stomach the volatility, Wolfspeed offers a compelling long-term opportunity. The company's leadership in SiC—a material integral to the EV and renewable energy sectors—positions it to benefit from a $20 billion market expansion. The GM and Renesas contracts provide a revenue floor, while the restructuring creates a path to profitability by 2026.

However, timing is crucial. The stock's recent 100% surge has priced in much of the near-term optimism, leaving limited room for error. A more prudent approach might involve buying dips during the restructuring process, when the market overcorrects to the bankruptcy risks.

Conclusion

Wolfspeed's recent stock surge is not just a short-term trading frenzy—it's a reflection of a strategic inflection point. The GM contract, coupled with a robust restructuring plan and favorable macro trends, has repositioned the company as a key enabler of the EV transition. While the path is fraught with risks, the potential rewards for investors who can navigate the volatility are substantial. As the EV supply chain continues to evolve, Wolfspeed's silicon carbide technology may well prove to be the linchpin of the next decade of automotive innovation.