Wolfspeed (WOLF) has seen its stock price more than double recently, despite a significant drop of over 20% on May 27, largely fueled by promotion from Citrini Research, led by James van Geelen. Citrini’s unconventional approach and controversial past have attracted attention, but its claims about Wolfspeed’s silicon carbide (SiC) chips’ potential in AI data centers raise questions. While the company aims to pivot from a struggling EV market to capitalize on AI, the feasibility of this transition remains uncertain.
The market’s enthusiasm for Wolfspeed may be misguided, as the company faces operational challenges, including negative gross margins and underutilized fabs. Moreover, the high costs of SiC compared to traditional silicon chips could deter potential customers, particularly hyperscalers looking to minimize capital expenditures. With a 33% short interest, the stock’s recent gains appear driven more by speculative trading than solid fundamentals.
Investors should approach Wolfspeed with caution, as its path to profitability is unclear and hinges on successfully entering a market that has historically proven challenging for the company.
Source: fool.com