Fiery Flash: Wolfspeed’s wild ride: From silicon darling to bankruptcy brink

Our Fiery Flash of the week is Wolfspeed. The stock plunged nearly 80%, hitting an intraday low of $0.83 on Wednesday. It then staged a remarkable rebound, surging 130% to hover around $1.91 by the morning of May 23, 2025. Even so, the stock is still down roughly 50% over the past five days. If that isn’t Fiery Flash material, what is? This dramatic collapse comes amid reports that Wolfspeed is preparing to file for Chapter 11 bankruptcy within weeks, weighed down by a crushing debt burden and failed restructuring efforts.

Wolfspeed, based in Durham, North Carolina, is a leading manufacturer of silicon carbide (SiC) and gallium nitride (GaN) semiconductors. These materials are essential for high-efficiency power electronics, particularly in electric vehicles , renewable energy systems, and advanced industrial applications. The company has positioned itself as a key player in the transition to SiC technology, aiming to capitalize on the growing demand for energy-efficient solutions. 

The immediate catalyst for Wolfspeed's stock collapse was a report indicating that the company is preparing to file for Chapter 11 bankruptcy within weeks. The company's ambitious expansion plans, including a $5 billion investment in a new semiconductor plant in North Carolina, have strained its financial resources. The Wall Street Journal reported that Wolfspeed is grappling with a debt burden of approximately $6.5 billion and has been unable to secure out-of-court restructuring agreements with creditors. The company's financial woes are compounded by a $575 million debt payment due next year and uncertainties surrounding the receipt of $750 million in promised Chips Act funding, which may be jeopardized by the ongoing political shifts. 

Wolfspeed’s debt struggles are occurring against a backdrop of broader challenges in the non-AI related corner of the semiconductor industry, including slowing demand in industrial and automotive markets and tariff-induced uncertainties. In the past 2,5 years, automotive and industrial semiconductor markets are under pressure due to inventory corrections, political flip-flopping around EV-subsidies, weaker macroeconomic conditions, and delayed capital spending by end customers. 

Yet beneath the debt wreckage lies a compelling long-term case. Silicon carbide (SiC) and gallium nitride (GaN) technologies are at the heart of next-generation power electronics. SiC is increasingly favored in electric vehicles for its superior efficiency and thermal performance compared to traditional silicon, extending EV range and reducing charging time. GaN, meanwhile, is gaining traction in fast chargers, 5G infrastructure, and AI-data centers for its high-frequency and high-voltage capabilities. If Wolfspeed were not weighed down by its crushing debt load, it could have remained a frontrunner in this strategic transformation. The structural demand for SiC and GaN on a 5 year horizon remains strong, and industry players with sound balance sheets are likely to benefit significantly from this secular trend 

Wolfspeed’s fiery decline is a stark reminder of the risks inherent in high-growth, capital-intensive industries. While the company’s underlying technology and strategic market positioning remain compelling, its financial instability has severely undermined investor confidence. This is precisely why we continue to favor technology companies with minimal or no debt, businesses that can self-fund their growth in the coming years, regardless of fluctuations in end-market demand or the availability of external financing. As Wolfspeed enters what may be a drawn-out bankruptcy process, all eyes will be on whether the company can stabilize or if further deterioration awaits.