Retail Sentiment On Wolfspeed Stock Remains Bullish Despite Historic Drop To 27-Year Low

Wolfspeed Inc. (WOLF) stock plunged over 11% on Friday, hitting a historic low of $5.11—the lowest price since October 1998. 

Despite the steep decline, retail sentiment on Stocktwits remained bullish, with many users advocating for buying the dip.

The broader semiconductor sell-off was fueled by a Bloomberg report detailing the Biden administration's impending export restrictions on chips. These measures, set to be finalized before Biden’s term ends, aim to curb AI chip access for countries like China and Russia.

Wolfspeed's troubles, however, run deeper. 

The stock has plummeted over 85% in the past 12 months, dragged down by disappointing financial results, management struggles, and legal woes. 

In December, a report by Axios highlighted the company's challenges in scaling its silicon carbide (SiC) chips business, compounded by multiple class-action lawsuits alleging securities fraud.

The lawsuits stem from Wolfspeed’s announcement of first-quarter FY25 results on November 6, which revealed lower-than-expected guidance for the second quarter.

The company admitted to slower-than-anticipated demand and delayed EV customer timelines. 

Plaintiffs argue that these developments starkly contradicted earlier claims that its Mohawk Valley fabrication facility would generate $100 million in revenue at 20% utilization, leading to a drop in Wolfspeed’s stock price, and massive losses.

Wolfspeed Inc. Sentiment and Message Volume on Jan.10 as of 12:00 p.m. ET | Source: Stocktwits

Despite the bear run, retail sentiment on Stocktwits around Wolfspeed’s shares was ‘bullish’ with chatter dipping marginally to ‘high’ from ‘extremely high’ levels a day ago. 

Many users on the platform recommended using the opportunity to buy up more shares. 

One user speculated that the sell-off could involve factors beyond bearish sentiment, hinting at deeper market dynamics.

Wolfspeed had transitioned from its lighting business to focus on SiC semiconductors, which are integral to some electric vehicles (EVs). 

While the pivot initially boosted the stock, delays in EV adoption and intensifying competition from Chinese firms have since eroded investor confidence.

The stock's future outlook also looks bleak on Wall Street, with analysts warning of potential headwinds from Donald Trump’s presidential victory, which could spell the end of the $7,500 EV tax credit. 

According to a research note from Mizuho after the November election, reduced subsidies might slow EV production, impacting SiC demand and Wolfspeed's growth trajectory.

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