Why Wolfspeed Stock Is Skyrocketing Today

Shares of Wolfspeed (NYSE: WOLF) are seeing explosive gains in Wednesday's trading. The silicon carbide specialist's share price was up 25% as of 1 p.m. ET today amid the backdrop of a 1.5% gain for the S&P 500 index and a 2% jump for the Nasdaq Composite index.

Wolfspeed is surging today following fundraising news and a CHIPS Act announcement from the company. The stock is also getting a boost from the latest inflation report from the Bureau of Labor Statistics (BLS).

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Wolfspeed stock surges on funding news and inflation data

Wolfspeed published a press release today announcing that it had raised approximately $200 million through new stock sales. The company sold roughly 27.79 million shares of common stock and will use the proceeds to strengthen its capital structure, reduce leverage, and address outstanding maturities on its balance sheet.

Now that the stock sale has been completed, Wolfspeed says that it is a step closer to receiving funding set aside for it through the CHIPS Act. While the company ended its last reported quarter with $1.7 billion in cash and investments, it is posting large losses and ended the period with $3 billion in long-term debt and $3.1 billion in long-term liabilities. The CHIPS Act funding should give the company some needed financial flexibility.

The stock is also climbing thanks to bullish macroeconomic news. The latest Consumer Price Index report showed core inflation came in at 3.2% in December, below the 3.3% mark targeted by the average economist estimate. The report has eased fears surrounding inflation and makes it more likely that the Federal Reserve will continue to cut interest rates this year.

What comes next for Wolfspeed

Despite today's explosive gains, Wolfspeed stock is still down 82% over the last year. The semiconductor company has struggled as demand for electric vehicles has weakened and planned expansion initiatives have been called off. The silicon carbide specialist is also still in the process of finding its next CEO.

In another press release published today, Wolfspeed announced that it would be publishing results for the second quarter of its current fiscal year on Jan. 29. The company will also be hosting a conference call to discuss the results, business operations, and future initiatives.

Investors will get an in-depth look at the state of the business with the upcoming quarterly report, and it's possible that the company will share details about its leadership transition plans and future growth initiatives.

On the heels of massive sell-offs for the stock, Wolfspeed could have big rebound potential -- but the company will need to show that it has a feasible path to improving its margins.

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Keith Noonan 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.