Core Viewpoint - Wolfspeed (WOLF) has underperformed in the market, with a year-to-date decline of 7.2%, compared to the broader Zacks Computer and Technology sector's decline of 5.7% and the Zacks Semiconductor – Discretes industry's fall of 4.7% [1] Financial Performance - The underperformance is attributed to weak financial results in Q2 of fiscal 2025, primarily due to softness in the industrial and energy markets, which limited overall revenue growth [2] - High underutilization costs at manufacturing facilities and lower efficiency during the transition to larger-scale production have contributed to financial strain, resulting in a decline in gross margin and raising investor concerns about profitability [3] Growth Potential - Despite lower revenue levels, Wolfspeed is experiencing strong growth in the electric vehicle (EV) market, with robust demand expected to drive higher revenue contributions in the latter half of fiscal 2025 [4] - The company is nearing completion of a $5 billion semiconductor factory in Siler City, NC, set to begin production in June 2025, which will manufacture advanced silicon carbide crystals for electric vehicles [5] - Wolfspeed has secured significant support under the CHIPS and Science Act, with the U.S. Department of Commerce proposing up to $750 million in direct funding to support the expansion of silicon carbide production, reinforcing its position in domestic supply chains and technological innovation [6] - The silicon carbide market is projected to witness a 9.7% compound annual growth rate (CAGR) from 2024 to 2032, creating significant opportunities for Wolfspeed [7] Q3 Forecast - For Q3 of fiscal 2025, Wolfspeed expects revenues of $170-$200 million, with the Zacks Consensus Estimate at $186.30 million, indicating a 7.17% decrease from the previous year [8] - The non-GAAP loss is estimated to be between 88-76 cents per share, with the consensus mark for the bottom line pegged at a loss of 82 cents per share, widening by 3 cents over the past 60 days [9]

Core Viewpoint - The article compares two companies, Wolfspeed and IonQ, which are not traditionally classified as AI stocks but could benefit from the growth of the AI market. Wolfspeed focuses on silicon carbide (SiC) chips for electric vehicles, while IonQ specializes in quantum computing systems that may enhance AI processing capabilities [1][2]. Company Performance - Wolfspeed's stock has decreased by approximately 70% over the past year, while IonQ's stock has nearly tripled [3]. - Wolfspeed's revenue grew by 42% in fiscal 2022 and 24% in fiscal 2023, but only 6% in fiscal 2024 due to a cooling EV market and prioritization of AI GPUs by companies [4][5]. - Analysts predict a revenue decline of 6% for Wolfspeed in fiscal 2025, with expected revenue of $757 million and a widening net loss from $864 million to $1.09 billion [7]. - IonQ's revenue surged by 430% in 2022 and 98% in 2023, with expectations of 75% to 93% growth in 2024, projecting revenue to exceed $83 million in 2025 [10]. Market Position and Future Outlook - IonQ's quantum computing systems are designed to process data faster than traditional binary computers, but they currently face challenges such as high costs and power consumption [9]. - IonQ is expected to remain unprofitable in the near term but has significant growth potential as the quantum computing market expands [11]. - Wolfspeed's enterprise value is $6.5 billion, trading at nine times its fiscal 2025 sales, while IonQ, also with an enterprise value of $6.5 billion, trades at 78 times its sales for the current year [12]. - IonQ is favored as a better investment due to its faster growth, early mover advantage, and potential for broader adoption in AI applications compared to Wolfspeed, which may struggle to compete in the SiC market [13].

Core Viewpoint - Wolfspeed, a silicon carbide chipmaker, has experienced a significant decline in stock value and growth, raising questions about its future prospects in the semiconductor market [1][3][14] Company Performance - Wolfspeed's stock peaked at $141.87 in November 2021, reflecting a nearly 470% increase over five years, but has since plummeted to around $5 due to stalled growth and declining margins [1][3] - In fiscal 2022, revenue increased by 42% with an adjusted gross margin of 36%, largely driven by the electric vehicle (EV) market [3][4] - However, revenue growth slowed to 24% in fiscal 2023 and further declined to just 6% in fiscal 2024, with adjusted gross margins dropping to 13% [4][6] Market Dynamics - The slowdown in sales growth is attributed to a cooling EV market and a shift in focus by companies towards AI-oriented data center chips [6] - Tesla, a key customer, indicated that its upcoming powertrains would require 75% fewer silicon carbide chips, further impacting Wolfspeed's outlook [6] - Analysts predict a revenue decline of 0% to 15% year-over-year for the third quarter of fiscal 2025, with an overall expected decline of 6% for the year [7] Operational Challenges - To address slowing growth, Wolfspeed has expanded its manufacturing plants in New York and North Carolina, aiming to reduce die costs by over 50%, but this will take years to materialize [8] - The company has laid off 20% of its workforce and secured $750 million in funding from the U.S. Department of Commerce, yet it remains unprofitable with total liabilities of $6.66 billion and a high debt-to-equity ratio of 17.9 [9] Future Outlook - Despite the current challenges, analysts remain optimistic about the silicon carbide market, projecting a compound annual growth rate (CAGR) of 9.7% from 2024 to 2032 [11] - From fiscal 2025 to fiscal 2027, Wolfspeed's revenue is expected to grow at a CAGR of 44%, increasing from $757 million to $1.57 billion as the SiC market recovers [12] - The U.S. ban on purchasing SiC chips from Chinese manufacturers may also provide a competitive advantage for Wolfspeed [12] Investment Considerations - With an enterprise value of $6.2 billion, Wolfspeed's valuation at 6 times next year's sales may not be attractive, especially given the uncertainty surrounding its recovery [13] - The company is likely to face ongoing challenges in the near term, suggesting that investors may want to consider more stable semiconductor stocks for the time being [14]

Portfolio Moves - Elliott Investment Management made several portfolio moves in the fourth quarter, including closing multiple options positions and adjusting its technology exposure [1][2] - The firm added new positions during the fourth quarter, although specific details on these new positions were not provided in the excerpts [1] Closed Positions - Elliott closed out of call options in several companies, including Arm Holdings, American Airlines, and Alaska Air Group [2] - The firm also closed multiple put positions in companies such as Equinix, Hyatt Hotels, and Host Hotels [2] Performance Changes - Notable increases in positions included Invesco QQQ Trust (increased by 369%), MicroStrategy Inc (increased by 200%), and CorMedix Inc (increased by 85%) [4] - Significant decreases in positions included ICON Plc (decreased by 62%), RingCentral Inc (decreased by 55%), and NRG Energy Inc (decreased by 50%) [4]

Core Viewpoint - Electric vehicle (EV) stocks, including Rivian, Wolfspeed, and Indie Semiconductor, experienced significant price increases despite the absence of company-specific news, likely driven by general positive sentiment in the EV sector and short covering due to previous declines [1][2]. Group 1: Stock Performance - Rivian's shares rose by 5.7%, Wolfspeed's by 14.9%, and Indie Semiconductor's by 5.1% as of 1:30 p.m. ET [1]. - All three stocks have seen substantial declines, with Indie down 78%, Rivian down 93%, and Wolfspeed down 96% from their all-time highs [3]. Group 2: Market Context - The EV sector has been under pressure, with all three companies currently losing money while investing heavily to capture market share [4]. - A significant slowdown in electric vehicle sales last year has led to muted demand for their products, compounding the financial strain from their investments [5]. Group 3: News Impact - A media report about the State Department's interest in purchasing 400 armored electric vehicles may have contributed to the rise in EV stocks, particularly as it was initially suggested that the contract would go to Tesla [6][8]. - Clarification from a department official indicated that the project is currently on hold, and there are no immediate plans for a bidding request [7][9]. Group 4: Future Outlook - The current uptick in EV stocks may not indicate a recovery, as a true rebound will depend on a broader resumption of EV demand growth, which could be driven by technological advancements or improved economic conditions [9].

Core Viewpoint - Wolfspeed reported mixed results for the second quarter of fiscal 2025, with a decline in revenues but strong demand in electric vehicles (EVs) and support from government initiatives like the CHIPS Act [1][2][7]. Group 1: Financial Performance - Revenues for Wolfspeed decreased by 13.4% year over year to $180.5 million [2]. - The company experienced a sequential decline of 6% in power device revenues and an 8% drop in materials revenue due to reduced inventory levels from customers [15]. - Gross margin fell significantly by 90.6% year over year, primarily due to underutilization costs at the Mohawk Valley facility [16]. - For the third quarter of fiscal 2025, Wolfspeed expects revenues between $170 million and $200 million, with a projected non-GAAP loss of 76 to 88 cents per share [17][18]. Group 2: Market Demand and Growth Drivers - Wolfspeed's EV revenues surged by 92% year over year, driven by increased demand and investments from major automotive companies like General Motors [8]. - The Mohawk Valley facility generated $52 million in revenues during the second quarter, with expectations for growth to between $55 million and $75 million in the next quarter [9]. - The company is benefiting from a growing network of partnerships, including collaboration with Infineon Technologies, which enhances supply chain stability and supports demand for silicon carbide solutions [10]. Group 3: Technological Advancements - Wolfspeed introduced its Gen 4 technology platform, which aims to improve system efficiency and reduce development costs, offering a 21% reduction in on-resistance and up to 15% lower switching losses [12][13]. - This new platform is focused on high-power applications, including EV powertrains and renewable energy, positioning the company for significant performance improvements [13]. Group 4: Competitive Positioning - Over the past month, Wolfspeed shares have declined by 19.8%, underperforming the broader Zacks Computer and Technology sector and the Zacks Semiconductor – Discretes industry [3][6]. - The company has underperformed compared to industry peer Tokyo Electron, which saw a 6.4% increase in stock value over the same period [6].

Group 1 - The article discusses the potential for undervalued stocks that are mispriced by the market, suggesting that investors should consider joining the investing group Out Fox The Street for insights and stock picks [1][2] - Out Fox The Street offers features such as model portfolios, stock picks with identifiable catalysts, daily updates, real-time alerts, and community chat for direct interaction with the leader, Mark [2] - The article emphasizes the importance of diversification in managing portfolio risk while uncovering potential multibaggers [2] Group 2 - The article does not provide specific financial data or performance metrics related to the companies mentioned, focusing instead on the services offered by the investing group [1][2][3]

Financial Performance - Year-over-year revenue decreased by $30.6 million to $375.2 million, with a gross margin decline to -19.6% from 12.9%[119] - Operating loss increased to $553.1 million compared to $193.0 million, with diluted loss per share at $5.12 compared to $1.99[119] - Revenue for the three months ended December 29, 2024 decreased to $180.5 million, down 13% from $208.4 million in the same period of 2023[130] - Gross profit for the three months ended December 29, 2024 was a loss of $37.2 million, compared to a profit of $27.8 million in the same period of 2023, representing a 234% decline[132] - Underutilization costs were $55.3 million compared to $70.0 million, impacting gross profit significantly[119] Investment and Capital Expenditure - The company plans to invest approximately $1.1 billion to $1.3 billion in net capital investment for fiscal 2025[124] - The company expects to invest approximately $2.0 billion in the Mohawk Valley Fab, with $1.2 billion spent to date and $467.2 million received in reimbursements[154] - A new materials manufacturing facility in Siler City, North Carolina is projected to cost approximately $2.3 billion, with $1.9 billion spent as of December 29, 2024[155] - For fiscal 2025, the company targets capital investments of approximately $1.1 billion to $1.3 billion, primarily for capacity and infrastructure projects[156] Debt and Financing - Long-term debt increased to $6,423.8 million at December 29, 2024, compared to $6,161.1 million at June 30, 2024[119] - The company expects to need additional funding to complete its intended capacity expansions and has issued $250.0 million in senior secured notes due 2030[146] - The company is evaluating options to refinance its 1.75% convertible senior notes due May 1, 2026, including potential equity-linked securities[147] - The company issued an additional $250.0 million of 2030 Senior Notes in Q2 fiscal 2025, with the ability to issue up to $500.0 million more under certain conditions[151] Operational Changes - The company initiated a headcount reduction and facility consolidation plan to optimize its cost structure[123] - The Mohawk Valley Fab began revenue production in late fiscal 2023, supporting increased production capacity[120] - Cash used in operating activities of continuing operations increased by 11% to $327.1 million for the six months ended December 29, 2024[159] - Cash provided by financing activities decreased by 66% to $318.5 million, primarily due to lower proceeds from financing activities compared to the previous period[162] Research and Development - Research and development expenses were $95.3 million for the six months ended December 29, 2024, compared to $89.4 million for the same period in 2023[129] - Research and development expenses for the six months ended December 29, 2024 increased by 7% to $95.3 million from $89.4 million in the same period of 2023[133] Other Financial Metrics - Sales, general and administrative expenses for the three months ended December 29, 2024 decreased by 21% to $51.1 million from $64.9 million in the same period of 2023[134] - Factory start-up costs for the three months ended December 29, 2024 increased by 117% to $22.8 million compared to $10.5 million in the same period of 2023[135] - Loss on disposal or impairment of long-lived assets for the three months ended December 29, 2024 was $125.8 million, a significant increase from $0.3 million in the same period of 2023[136] - Interest expense for the three months ended December 29, 2024 increased by 25% to $80.5 million from $64.3 million in the same period of 2023[138] Cash and Investments - Cash, cash equivalents, and short-term investments totaled $1,404.8 million at December 29, 2024, down from $2,174.6 million at June 30, 2024[119] - As of December 29, 2024, total cash, cash equivalents, and short-term investments decreased to $1,404.8 million, down $769.8 million from June 30, 2024[149] - The market value of MACOM common stock held by the company was approximately $95.0 million as of December 29, 2024, with a potential decrease of $9.5 million if market values drop by 10%[166] - The company received a total of $2 billion in unsecured deposits from Renesas Electronics America Inc., with $1 billion received in Q1 fiscal 2024 and subsequent deposits of $500 million and $500 million in Q3 and Q4 fiscal 2024, respectively[150]

Core Viewpoint - Wolfspeed reported a narrower non-GAAP loss in Q2 fiscal 2025 compared to estimates, but the loss widened year-over-year, indicating ongoing challenges in the market [1][5]. Financial Performance - The company reported revenues of $180.5 million, a decrease of 13.4% year-over-year, but slightly above consensus estimates by 0.63% [2]. - Non-GAAP gross margin fell to 2%, down from 16% in the same quarter last year, primarily due to $28.9 million in underutilization costs [4]. - Non-GAAP operating loss was $105.2 million, wider than the $70.8 million loss reported in the previous year [5]. Revenue Breakdown - Mohawk Valley Fab contributed $52 million in revenues during the quarter [2]. - Power Products accounted for 50.3% of total revenues, while Materials Products contributed 49.7% [2]. - Power Products revenues decreased by 15.7% year-over-year to $90.8 million, and Materials Products revenues decreased by 10.9% year-over-year to $89.7 million [2]. Balance Sheet and Cash Flow - As of December 29, 2024, the company had cash and short-term investments of $1.40 billion, down from $1.69 billion as of September 29, 2024 [6]. - Long-term debt increased to $3.38 billion from $3.13 billion over the same period [6]. - Free cash outflow was $598.1 million, consisting of $195.1 million in operating cash outflow and $401.8 million in capital expenditures [6]. Future Guidance - For Q3 fiscal 2025, Wolfspeed expects revenues between $170 million and $200 million, with a non-GAAP loss projected between 88 and 76 cents per share [7]. - The company anticipates a non-GAAP gross margin ranging from negative 3% to 7% and operating expenses between $104 million and $99 million [7]. - Restructuring-related costs of $72 million are expected, with $35 million in cost of revenues and $37 million in operating expenses [8]. Market Performance - Wolfspeed's shares have declined by 82.3% over the past year, significantly underperforming the Zacks Computer & Technology sector, which returned 26.7% [3].

Core Insights - The transformative potential of artificial intelligence (AI) could add $2.6 trillion to $4.4 trillion in annual value, necessitating increased demand for specialized semiconductors [1] - Silicon carbide (SiC) semiconductors outperform traditional silicon, offering energy efficiency improvements exceeding 40% in high-temperature environments [2] - Wolfspeed (WOLF) is positioned to capitalize on the growing demand for SiC semiconductors, which are essential for AI applications in data centers [3] Company Overview - Wolfspeed dominates the SiC semiconductor market with wide-bandgap chips that reduce energy loss in power-intensive applications, with a projected 30% annual growth for SiC chips through 2032 [4] - The company has invested in the world's largest 200mm SiC manufacturing facility in New York and is constructing another in North Carolina, enhancing production efficiency [5][6] - Despite market leadership, Wolfspeed shares have declined 93% over the past 36 months, trading at less than 1x trailing sales due to near-term challenges [7] Growth Potential - Analysts forecast a 46% revenue increase for Wolfspeed in fiscal 2026 as production capacity expands and demand accelerates, supported by a recent $200 million equity offering [8] - The U.S. CHIPS Act could provide Wolfspeed with $750 million in proposed direct funding, part of a potential total of $2.5 billion to support U.S. capacity expansion [9] Market Challenges - Recent political developments have created uncertainty regarding the timing of CHIPS Act funding, although bipartisan support for semiconductor production suggests eventual funding [10] - Wolfspeed faces risks from larger competitors entering the SiC market and potential shifts in AI chip architecture that could impact demand [11] Investment Opportunity - Wolfspeed presents a unique investment opportunity for risk-tolerant investors, with $11 billion in design wins and critical positioning in AI and electric vehicles [12]