Over the past few years, silicon carbide (SiC) and gallium nitride (GaN) chips both gained momentum as alternatives to traditional silicon (Si) chips. SiC and GaN chips are both wide bandgap (WBG) semiconductors, which can switch faster, waste less energy, and operate at higher frequencies and temperatures than Si chips.
That makes them well-suited for electric vehicle (EV) power electronics, fast chargers, solar inverters, data center power supplies, and motor drives. Several chipmakers produce the two chips together because they complement each other, are manufactured in a similar way, and target the same markets -- but they're not exactly the same.
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SiC chips typically operate at mid- to high voltages, while GaN chips operate at low to mid-voltages. SiC chips are slower and generally pricier than GaN chips, but they're more robust and better suited for high-voltage EV powertrains and industrial systems. GaN chips are faster but more delicate, so they're usually installed in smaller devices like phone and laptop chargers.
Both types of chips have plenty of growth potential. The combined SiC and GaN chip market could expand at a compound annual growth rate (CAGR) of 25% from 2024 to 2032, according to Global Market Insights, as they replace Si chips in certain markets. Let's see which one of the top stocks in that niche market -- Navitas Semiconductor (NVTS 6.64%) and Wolfspeed (WOLF +13.36%) -- is a better long-term buy.
The differences between Navitas and Wolfspeed
Navitas and Wolfspeed both produce SiC and GaN chips, but their business models are different. Navitas is a fabless chipmaker which outsources its production to third-party foundries. Wolfspeed manufactures its own chips at its first-party foundries.
Navitas generates most of its revenue from its GaNFast Power ICs, which bundle together switching, sensing, control, and security features. In 2022, it increased its exposure to the SiC market by acquiring GeneSiC, a producer of SiC chips for the EV and data center markets, but that business is still smaller than its core GaN business.
NASDAQ: NVTS
Key Data Points
Wolfspeed mainly manufactures and sells SiC materials and power devices. It previously produced GaN-on-SiC chips (which combine the two technologies) for radio frequency (RF) devices, but it sold that smaller business to MACOM in late 2023.
Both companies struggled with declining sales over the past year as the EV, solar, and industrial markets cooled off in a challenging macro environment. Navitas weathered that storm, but Wolfspeed filed for bankruptcy protection this June as it grappled with soaring manufacturing costs, rising debt, and widening losses. In September, Wolfspeed emerged from bankruptcy after reducing its total debt by 70%, extending its maturities to 2030, and reducing its annual cash interest expenses by about 60%.
Which chipmaker will grow faster?
Analysts expect Navitas' revenue to decline 44% to $46 million in 2025 and 12% to $41 million in 2026 as that cyclical slowdown continues. It's only expected to slightly narrow its net loss from $85 million in 2024 to $73 million in 2026. But in 2027, they expect its revenue to surge 80% to $74 million as the macro environment stabilizes and it ships its first chips for Nvidia's data centers.
Under a deal signed this May, Nvidia will install Navitas' GanFast and GeneSiC chips into its AI data centers to support its next-gen 800 V HVDC power architecture. It's expected to narrow its net loss to $62 million in 2027 as those tailwinds kick in, but it should stay unprofitable.
Wall Street expects Wolfspeed's revenue to rise 6% to $800 million in fiscal 2026 (which ends next June) and 16% to $926 million in 2027. That faster recovery should be driven by the expansion of the AI market (which requires a lot of high-voltage SiC chips) and the stabilization of the EV, industrial, and energy markets. Wolfspeed's vertically integrated business model -- which it continues to expand with its own 200mm plants -- should support that recovery.
NYSE: WOLF
Key Data Points
On the bottom line, Wolfspeed is expected to narrow its net loss from $1.6 billion in fiscal 2025 to $255 million in fiscal 2027 as it reduces its debt. Wolfspeed still ended its latest quarter with $7.6 billion in total liabilities and negative shareholder equity, while Navitas had just $59 million in total liabilities and a low debt-to-equity ratio of 0.16.
Which stock is more reasonably valued?
With an enterprise value of $5.1 billion, Wolfspeed is valued at five times next year's sales. Navitas, with an enterprise value of $1.7 billion, trades at 42 times next year's sales.
Wolfspeed seems undervalued because it just emerged from bankruptcy, it's still shouldering a lot of debt, and it runs a capital-intensive business. Navitas operates a nimbler business with a lot of growth potential, but its valuations are likely being inflated by its headline-grabbing deal with Nvidia.
I wouldn't rush to buy either of these stocks in this frothy market. But if I had to choose one over the other, I'd pick Wolfspeed because it's cheaper and its near-term growth rates are healthier. Navitas might eventually grow faster than Wolfspeed, but its stock is too hot to handle right now.
