Wolfspeed (WOLF 0.10%) stock has taken investors on a wild ride over the last year. Last June, the company announced that it was receiving Chapter 11 bankruptcy protections as it moved forward with a corporate restructuring.
The bankruptcy news actually rekindled some of the meme stock energy that had previously driven gains for the company's share price, but the terms of the company's financial restructuring meant that many shareholders who bought into the company wound up with their investment positions deeply in the red.
Wolfspeed's restructuring is now squarely in the rearview mirror, and the company has managed to wipe much of the debt previously on the books by transferring the ownership of assets to major creditors and transferring equity through a reshaped share structure. The silicon carbide (SiC) and gallium nitride (GaN) chip specialist is moving forward with a greater degree of financial flexibility, but is the stock still more like a trap than an investment?
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Wolfspeed remains a high-risk, high-reward play
The bull thesis for Wolfspeed stock in recent years has largely centered around the possibility that the company would see surging sales for its SiC power chips in conjunction with the rise of the electric vehicle market. More recently, some investors have been betting that SiC chips could play an increased role in the powering of artificial intelligence (AI) data centers.
On the other hand, hopes for surging sales and improving margins were dashed by a substantial deceleration in EV sales growth. Making matters worse, the company has also faced a rise in competition from Chinese SiC and GaN manufacturers. And while demand connected to data centers could eventually turn into a meaningful performance catalyst, the trajectory on that front is uncertain and remains a speculative bet.
NYSE: WOLF
Key Data Points
Wolfspeed was previously forced into bankruptcy protection and restructuring because it had amassed a large debt load and faced high interest payments. The business had fallen far short of previous sales forecasts and was never able to achieve forecast margin improvements connected to improved economies of scale.
Wolfspeed faces another year of big challenges
The potential geopolitical importance of sourcing SiC and GaN chips from domestic providers rather than Chinese manufacturers suggests that Wolfspeed could receive direct and indirect sources of governmental support that help the business transform into a long-term winner, but many of the core challenges facing the business pre-bankruptcy still remain.
In the first quarter of the company's 2026 fiscal year, which ended Sept. 28, Wolfspeed's revenue came in at $197 million -- up 1% from the prior-year quarter. Meanwhile, the business posted a non-GAAP (generally accepted accounting principles) adjusted gross margin of negative 26% -- down from a margin of 3% in last year's quarter.
With signs of softness in the EV market and little indication as to whether or when the company's chips might see greater data center adoption, Wolfspeed will likely continue posting massive losses. Surprise wins in the AI space could turn the stock into a big winner overnight, but betting on that prospect looks more like a trap right now.
