Shares of a chipmaker that nearly went bankrupt have soared. The U.S. is ready to grant it a loan

Shares of small-cap chipmaker Wolfspeed soared more than 14% in premarket trading on October 8. The company announced that the U.S. Department of Defense is prepared to provide it with a 30-year loan of $1.5 billion in exchange for a stake of up to 7.5% in the chipmaker. Last year, Wolfspeed filed for bankruptcy protection due to doubts about its ability to continue operations.

Wolfspeed shares rose nearly 16% in the first few minutes of extended trading in New York, after which they retreated slightly but remained up nearly 14%. Investors reacted to the news that the U.S. Department of Defense had approved a 30-year, $1.5 billion loan for the company—as a measure to support the development of a domestic semiconductor supply chain.

In return, Wolfspeed has agreed to issue warrants to the agency, entitling it to purchase up to 7.5% of the company’s shares. The issuance of the securities will take place in several stages, in proportion to the financing tranches.

The chipmaker plans to use the funds raised to produce silicon carbide-based materials and high-power semiconductors, which are needed for power electronics in the aviation and aerospace sectors, as well as in the defense industry. The company also intends to modernize its production facilities for manufacturing materials used in combat communications systems.

The decision to grant the loan is still preliminary, according to the press release. To receive the funds, Wolfspeed must undergo a comprehensive review.

A little over a year ago, Wolfspeed was on the brink of bankruptcy. In May 2025, the company announced that, due to $5.6 billion in debt, it had doubts about its ability to continue operations. In June, it filed for Chapter 11 bankruptcy protection under U.S. law, which allows for the reorganization of the company rather than liquidation. Three months later, the company emerged from bankruptcy: as a result of the restructuring, it managed to reduce its total debt by approximately 70%, extend repayment terms until 2030, and lower its annual interest expenses by 60%.

According to its financial statements, Wolfspeed’s revenue fell 12.2% to $665.1 million for fiscal year 2026, which ended on June 28. However, the company managed to post a profit of about $5 million—after a loss of $1.6 billion a year earlier. Both figures, however, are largely “on paper.” The massive loss in fiscal year 2025— twice as large as the losses from all previous years combined—was driven by large-scale asset write-downs and costs associated with the construction of a new silicon carbide manufacturing plant. Meanwhile, the company generated $563.4 million in profit in 2026 from a reorganization.

Since the beginning of the year, Wolfspeed’s stock has soared by more than 80%. However, Wall Street remains cautious about the company’s outlook: its stock has received only three “hold” ratings from analysts. The average price target is $27.50, which implies a 12% decline from the most recent closing price.