Why Rivian, Wolfspeed, and Navitas Semiconductor Plunged Today

Source The Motley Fool

Shares of electric vehicle company Rivian (NASDAQ: RIVN) and EV-related power chipmakers Wolfspeed (NYSE: WOLF) and Navitas Semiconductor (NASDAQ: NVTS) were down on Wednesday, falling 5.7%, 15.2%, and 13%, respectively, as of 12:25 p.m. ET.

Rivian is an upstart electric vehicle challenger, while Wolfspeed is an emerging player in silicon carbide (SiC) wafer production and SiC-based chips used predominantly in EVs. Meanwhile, Navitas is a small-cap chip designer of both SiC and gallium nitride power chips for EVs, industrial, and consumer electronics applications.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

The plunge today appeared to be partly a continuation of yesterday's down market in response to higher interest rates. But the overly harsh sell-off in EV-related stocks and semiconductor players can likely be attributed to a layoff announcement at a large Japanese competitor. The announcement suggested continued weak demand in the space, casting a pall over the EV and power semiconductor sectors.

Renesas lays off 5% of its workforce

Last night, Japanese chipmaker Renesas (OTC: RNECY) announced it would be laying off a little less than 5% of its workforce. While that may not sound like much, Renesas is one of the larger players in the automotive and industrial chip sector, with a $24 billion market cap. The total number of layoffs would amount to about 1,000 employees.

The layoffs are a sign of continued awful demand for auto and industrial-related chips. And keep in mind, this is despite these markets having already been in a downturn for almost three years now. Semiconductor cycles typically last about one and a half to two years, so the fact that Renesas is laying off 5% of its workforce at this seemingly late stage of the downcycle is quite worrying. Given the length of this downcycle, one would think an upturn might be imminent, but apparently that's not the case.

RNECY Revenue (Quarterly) Chart

RNECY Revenue (Quarterly) data by YCharts

The cause of the extended downturn is up for debate, but it's likely a combination of higher-for-longer interest rates, an extended downturn in China that shows little signs of recovery, and a slowdown in electric vehicle adoption in the U.S. and Europe.

That's unfortunate news for companies in this space, but it's especially bad for those that don't yet make profits -- like these three stocks.

Although Rivian gave some positive news last week that it beat analyst expectations for fourth-quarter deliveries, it is still losing quite a bit of money as it attempts to ramp up volumes from its factories, with a $1.1 billion operating loss in the third quarter alone.

Meanwhile, Wolfspeed has spent a huge amount of money and is taking on significant debt to do so in order to build up new silicon carbide factories ahead of anticipated demand. But if that demand doesn't show up, then the company could get into serious trouble with its creditors. This is why the stock is down significantly today, even as it has already fallen 85% over the past year.

As a small player in the space, Navitas has seen stagnating revenues and continued operating losses, and is down 50% over the past year. That being said, it doesn't have the debt problems Wolfspeed has.

A recovery looks further off

It has been frustrating for investors in EV stocks, as well as automotive and industrial chip stocks, of late, as this downturn has been quite prolonged. With the Renesas news, it seems the downturn could go on for that much longer.

At this point, investors in this space should only stick with profitable companies with strong balance sheets, which should be able to weather and potentially capitalize on industry weakness and potential consolidation. While a potential recovery could be quite strong, given the length of this downturn, there is also a possibility a recovery may not happen anytime soon if interest rates don't come down and China's economy falls into a prolonged slump, like Japan experienced since the 1990s.

All this means it's better to invest in the financially stronger companies in the space, rather than higher-upside but higher-risk companies like these three.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $363,385!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,870!*
  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $474,140!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of January 6, 2025

Billy Duberstein and/or his clients has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Wolfspeed. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Nvidia stock sinks 4% as Trump’s tariff plans rattle AI tradeNvidia shares fell over 4% early Monday after US President Donald Trump delivered a stern message about trade tariffs. Trump said on Sunday that no country would be given any special treatment regarding tariffs. He also signed new trade policies into effect on April 2, which he calls “Liberation Day.” This frightened investors, who had […]
Author  NewsBTC
Apr 01, Tue
Nvidia shares fell over 4% early Monday after US President Donald Trump delivered a stern message about trade tariffs. Trump said on Sunday that no country would be given any special treatment regarding tariffs. He also signed new trade policies into effect on April 2, which he calls “Liberation Day.” This frightened investors, who had […]
placeholder
Bitcoin Price Bounces Back—Can It Finally Break Resistance?Bitcoin price started a recovery wave above the $83,500 zone. BTC is now consolidating and might struggle to settle above the $85,500 zone. Bitcoin started a decent recovery wave above the $83,500
Author  NewsBTC
Yesterday 03: 37
Bitcoin price started a recovery wave above the $83,500 zone. BTC is now consolidating and might struggle to settle above the $85,500 zone. Bitcoin started a decent recovery wave above the $83,500
placeholder
Bitcoin Price Struggling but Short-Term Holders Might Be Setting the Stage for $150KBitcoin has recently displayed signs of upward momentum, trading at $85,215, marking a 2.2% increase in just the past day. Despite this short-term gain, the asset remains down by over 21.2% from its
Author  NewsBTC
Yesterday 08: 43
Bitcoin has recently displayed signs of upward momentum, trading at $85,215, marking a 2.2% increase in just the past day. Despite this short-term gain, the asset remains down by over 21.2% from its
placeholder
U.S. March Nonfarm Payroll Preview: Even If Data Aligns with Expectations, Financial Markets May Not Escape the Fate of VolatilityOn 4 April 2025, the United States will release its March Nonfarm Payrolls (NFP) data. The market consensus currently anticipates job growth of 128,000, a decline from February’s 151,000 (Figure 1). W
Author  TradingKey
Yesterday 08: 59
On 4 April 2025, the United States will release its March Nonfarm Payrolls (NFP) data. The market consensus currently anticipates job growth of 128,000, a decline from February’s 151,000 (Figure 1). W
placeholder
Gold price stabilizes ahead of Trump's tariffs announcement on “Liberation Day”Gold price (XAU/USD) stabilizes just above $3,130 at the time of writing on Wednesday following a mean reversal move the prior day after a fresh all-time high got eked out at $3,149 before closing in negative territory.
Author  FXStreet
Yesterday 10: 01
Gold price (XAU/USD) stabilizes just above $3,130 at the time of writing on Wednesday following a mean reversal move the prior day after a fresh all-time high got eked out at $3,149 before closing in negative territory.
goTop
quote