Could Wolfspeed Drive Long-Term Returns?

After Wolfspeed (NYSE: WOLF) stock plummeted 84.7% in 2024, investors had high hopes that shares would rebound in 2025 and ride the bullish wave that had recently driven so many semiconductor stocks soaring. With the first half of 2025 nearly in the books, investors are still waiting. From the start of the year through the end of May, shares of Wolfspeed have plunged 75.8%.

But does this poor performance mean that the opportunity for Wolfspeed stock to recover has passed it by, or do patient investors have the chance to grab the stock at a deep discount?

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Bulls are betting on the company's leading tech

As a self-proclaimed "pioneer" of silicon carbide technology, Wolfspeed is at the forefront of several growth industries, leading some investors to believe that Wolfspeed's best days lie before it. Because silicon carbide contributes to increased efficiency in power conversion systems and is useful in high-voltage power applications, it is ideal for use in sophisticated electronics.

With respect to electric vehicles (EVs), silicon carbide aids in helping inverters manage power flow from batteries to the motors, assisting in increased efficiency and range for the EVs; similarly, the material is also a valuable component in renewable energy products like solar panels and wind turbines.

Optimists are also encouraged with the company's growing success at Mohawk Valley, which the company recognizes as the "world's first, largest, and only 200mm Silicon Carbide fabrication facility." Wolfspeed has consistently reported improved yields at Mohawk Valley, and management believes yields will continue to improve. In the third quarter of 2025, Mohawk Valley contributed $78 million to the company's top line, representing a year-over-year increase of almost 179%.

Bears are skeptical for this reason above all

While there are numerous silicon carbide applications that can drive growth in Wolfspeed's business, one pressing issue weighs heavily on some investors' minds: the company's financial health.

In Wolfspeed's third-quarter 2025 10-Q, management raised the issue of whether the company can continue as a going concern over the ensuing 12-month period. Management's lack of confidence that the company, which had $6.5 billion in long-term debt as of March 30, 2025, can remain liquid is a glaring red warning light that is imperative for prospective investors to recognize.

Although some companies raise a going concern warning and then proceed to navigate toward more secure financial footing, Wolfspeed's woes seem sizable. In fact, The Wall Street Journal reported in late May that the company is on the verge of filing for bankruptcy, suggesting that could happen in the coming weeks.

Wolfspeed may have exposure to burgeoning industries like EVs, renewable energy, and data centers, but if the company is unable to satisfy its debt obligations -- something which seems to be quite likely -- investors have little to gain.

Should investors load up on Wolfspeed stock now?

With all of the uncertainty regarding Wolfspeed's financial situation, it's questionable, at best, if the company will prosper in the coming years. Therefore, only those investors comfortable with a high-risk investment should consider a position at this time. Fortunately for them, there are plenty of other semiconductor stocks to consider which are much better positioned to prosper. And for those looking to reduce risk while gaining exposure to the semiconductor industry, an exchange-traded fund like the VanEck Semiconductor ETF may be a better choice.

Should you invest $1,000 in Wolfspeed right now?

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.