Despite being open for a half-day session on Monday, stock markets are only now getting their first full trading day of the second half of 2023. Investors who have celebrated strong gains during the first six months of the year now have to figure out whether they think that the remainder of 2023 will keep going well. At least on Wednesday morning, market participants seemed unsure of that eventuality, and stock index futures were down as much as half a percent in premarket trading.
Summer vacations seemed to be prevalent among professionals working on Wall Street, but there were still a few stocks that garnered some attention early Wednesday. Both Wolfspeed (WOLF 20.84%) and MP Materials (MP 2.53%) made big gains as they sought to take advantage of volatile conditions in their respective markets. Read on to find out more about these two companies and their future prospects.
Wolfspeed scores a big supply agreement
Shares of Wolfspeed jumped 16% in premarket trading Wednesday morning. The semiconductor materials manufacturer announced a key supply agreement that could strengthen its business for years to come.
Wolfspeed and Japan's Renesas Electronics entered into a 10-year supply contract for silicon carbide wafers. Renesas is seeking to nail down ample supplies of the key material for its production of silicon carbide power semiconductors within the next two years, and the deal with Wolfspeed will give both companies time to ramp up their respective production processes in order to get ready. Under the terms of the agreement, Wolfspeed will get a $2 billion deposit to secure the commitment from Renesas.
Power semiconductor technology is going through a transformation right now, as increased demand from applications like electric vehicles (EVs) and renewable energy are requiring innovative new ways to boost efficiency and handle higher power needs. Wolfspeed has argued that silicon carbide is a superior material to conventional semiconductor materials, particularly in areas like EV charging infrastructure, industrial power supplies, and variable speed drive technology.
The deposit money will help Wolfspeed move forward with construction projects such as its new materials factory in North Carolina, which will produce larger wafers that in turn should cut costs and boost production capacity. Given the speed at which technology is evolving, Renesas seems to be making a smart move working closely with Wolfspeed to prepare for the future.
MP rises amid rare earth metals trade controversies
Elsewhere, shares of MP Materials were 9% higher in premarket trading. The producer of rare earth metals has found itself at the center of controversy on trade issues between the U.S. and China, and shareholders see opportunities for price increases and potential profit boosts as a result.
Chinese government officials announced late Monday before the Independence Day holiday that they would restrict exports of gallium and germanium, two metals that have seen increasing demand as a result of strengthening output of electric vehicles and semiconductor chips. The move came after U.S. officials in Washington amped up their arguments against providing China with access to key technological advances, and many saw it as a potential precursor to more extensive curbs on Chinese exports of rare earth metals needed in a variety of applications.
MP is the largest producer of rare earth materials in the Western Hemisphere, with its Mountain Pass facility producing a rare earth concentrate rich in vital metals. Currently, MP ships most of that concentrate to China for processing and refining, but it's looking to produce and sell its own separated rare earth materials in the near future. Those would include neodymium-praseodymium oxide, which it eventually hopes to use to build its own neodymium-iron-boron magnets.
Many officials believe it's imperative for the U.S. to secure its own supplies of rare earth materials, and that's been a key part of MP's business model. MP's stock has risen and fallen with rare earth markets and the tension levels on the trade front, and it looks like investors are preparing for another potential upward cycle for the shares.