Wolfspeed on Tuesday announced major chip funding ahead of the 2024 U.S. elections to speed up its EV and AI growth plans. Wolfspeed stock reversed lower on Friday, snapping a three-session win streak, but bagging a sizable gain for the week.
The technology company said $750 million in proposed funds under the 2022 CHIPS and Science Act would underpin "a first-of-its-kind 200mm silicon carbide manufacturing footprint in upstate New York and central North Carolina." It signed a nonbinding preliminary memorandum of terms with the U.S. Department of Commerce to support those expansion plans.
In addition, Wolfspeed secured $750 million in fresh financing from Apollo, Fidelity and other firms. Combined, the $1.5 billion in investments will boost domestic production of silicon carbide for electric vehicles (EVs), artificial intelligence (AI) data centers and battery storage systems, Wolfspeed said.
Some analysts said the announced funding should alleviate liquidity worries through 2026.
The proposed CHIPS Act funding depends upon meeting performance milestones, Wolfspeed says.
The U.S. is aiming to increase domestic chip production to bolster national security. But government support to speed up EV adoption is an extremely divisive election issue.
Big Week For Wolfspeed Stock
Shares closed down 1.3% to 16 on the stock market today, after jumping more 6% in Friday morning trade. Wolfspeed stock ended a three-session rally but scored a 39.5% weekly gain in huge volume.
Wolfspeed and General Motors partnered on electric vehicles in 2021. Tesla was an early adopter of silicone carbide chips, which improve performance and lower costs vs. standard silicon, according to Wolfspeed.
On Wednesday, GM and Lithium Americas announced a pact tied to EV batteries.
Tesla Warning Hit Chip Stocks
Semiconductor stocks plunged in March 2023 after Tesla warned on lower use of silicon carbide technology.
This year, Wolfspeed's shares have continued to tumble amid mounting losses. That slide came despite the company signaling "improved profitability" in August despite "significant factory startup costs."
Wolfspeed has recovered in October amid the chip funding news. It also benefited from an analyst report that the chipmaker is in final talks to supply 200-millimeter wafers to major third-party customers.
Despite this week's rally, the chip stock remains down more than 63% so far in 2024.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
