Chipmaker Wolfspeed loses half of market value amid federal funding uncertainty

Quotes on small-cap semiconductor manufacturer Wolfspeed plummeted almost 52% on Friday, March 28, hitting their lowest level in nearly three decades. Reuters attributes the decline to uncertainty over federal funding.

On Friday, Wolfspeed tumbled almost 52% on the New York Stock Exchange to $2.59 per share, its lowest closing price since April 22, 1997, when it closed at $2.50 per share.

Reuters attributes plunge to uncertainty over federal funding. Wolfspeed has been expecting about $750 million under the 2022 CHIPS and Science Act, designed to boost semiconductor manufacturing in the U.S. with $39 billion in federal funding. However, in early March, President Donald Trump said the U.S. should repeal the law.

“Your CHIPS Act is a horrible, horrible thing. We give hundreds of billions of dollars, and it doesn't mean a thing. They take our money and they don't spend it,” Trump told lawmakers.

Among CHIPS Act grants, Wolfspeed's was the largest that had not been officially awarded, CFRA Research senior analyst Brooks Idlet told Reuters. He speculates that if the funding is withdrawn, the company will face “devastating consequences requiring major restructuring to preserve cash.”

Wolfspeed has been struggling to improve its liquidity for several months, judging by its financials.

In October, the company announced that it had signed a memorandum with the U.S. Department of Commerce for up to $750 million in funding under the CHIPS Act. An additional $750 million was pledged by a consortium of investment funds led by Apollo, the Baupost Group, Fidelity Management & Research Company, and Capital Group. Wolfspeed planned to use the funds to manufacture silicon carbide for EVs, AI data centers, and batteries.

Additionally, the company expected to obtain $1 billion in tax credits — also under the CHIPS Act. In total, Wolfspeed anticipated benefits of up to $2.5 billion.

In a press release on Friday, Wolfspeed revealed it had already received $192.1 million in cash tax refunds and expected to receive more than $600.0 million in fiscal 2026 (which begins on July 1).

It stated it has not revised its guidance for the fiscal-2025 third quarter, still expecting revenue of $170-200 million. For context, in the fiscal-2025 second quarter (ended December 29), the top line fell 13.4% year over year to $180.5 million, while the net loss nearly doubled to $372.2 million.

Wolfspeed claimed to be in talks with the White House and its lenders, including Apollo and Renesas.

In mid-January, Wolfspeed sold nearly 27.8 million shares for about $200 million. The company said it would use the proceeds to improve its capital structure. In the wake of the offering, three coverage analysts lowered their target prices for the stock, according to Yahoo Finance.

MarketWatch data shows that out of the 17 analysts who cover Wolfspeed, nine rate it a “hold,” while recommendations among the remaining eight are split evenly with four “buys” versus four “sells.” Their average target price of $9 per share implies upside of almost 250% versus the last closing price.