Why Wolfspeed Stock Is Skyrocketing Today

Shares of Wolfspeed (NYSE: WOLF) are making a big leap higher in Thursday's trading. The company's share price was up 19.5% as of 12:45 p.m. ET. At the same point in the day, the S&P 500 and Nasdaq Composite were up 1.6% and 2.1%, respectively.

Wolfspeed's valuation is roaring higher today following an article from Wall Street Journal Pro that highlighted the semiconductor specialist's status as the most shorted U.S. stock on the market. Despite today's rally, the stock is still down roughly 86.5% over the last year.

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Wolfspeed stock soars as short interest is highlighted

According to WSJ's report yesterday, Wolfspeed has the highest short interest of any U.S.-based stock. In other words, some investors have borrowed shares in order to bet that the company's share price will go down.

On the other hand, the spotlighting of high short interest on Wolfspeed stock also appears to be attracting buying attention from investors hoping that there could be a short squeeze on the stock.

When a heavily shorted stock begins to go up quickly, those who have sold it short may be forced to buy back the shares in order to minimize their losses. The buying action can have the effect of sending the company's share price even higher, which creates additional pressure for short-sellers to cover their positions and can spur more bullish momentum.

What's next for Wolfspeed?

As a heavily shorted stock that's seeing an uptick in buying from short-squeeze focused investors, Wolfspeed will likely continue to be highly volatile in the near term. In terms of fundamentals, the company is facing debt problems and is seeing weaker-than-anticipated demand for its silicon-carbide products in electric vehicles and other key end markets result in factory utilization.

There's also some doubt on whether $750 million in funding set aside for the company through the CHIPS Act will wind up coming through. Wolfspeed stock has been heavily battered due to a high risk of bankruptcy, but it is possible that receiving the CHIPS funding and some additional government support could energize the business.

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