Wolfspeed shares surge after chip deal 💡

During today's session, shares of the American company Wolfspeed (WOLF.US) are up over 17%. The positive sentiment towards the company, which is one of the global leaders in the semiconductor market focused on silicon carbide and gallium nitride (GaN) technologies, stems from a signed agreement for the supply of semiconductor wafer-based components to Tokyo Renesas Electronics. The entire agreement is set to last for 10 years, and Renesas has already deposited $2 billion related to the contract.

Both companies stated that the demand for semiconductors is "dramatically growing" due to the development of electric vehicles and clean energy. 

"The agreement for wafer supply from Wolfspeed will provide Renesas with a stable, long-term supply base of high-quality silicon carbide wafers. This will enable Renesas to scale our power semiconductor offering to better serve customers across a wide range of applications," said Hidetoshi Shibata, CEO of Renesas.

Compared to conventional silicon semiconductors, silicon carbide devices offer higher energy efficiency, greater power density, and lower system costs.

Renesas' $2 billion deposit will support ongoing projects for the construction of Wolfspeed's new facility, which will be the world's largest silicon carbide materials factory. The multibillion-dollar facility is expected to generate over a tenfold increase in production capacity.

From a fundamental point of view, the company has been performing moderately in terms of profitability in the past. The company is burdened with debt, and the WACC/ROIC ratio suggests that the company has had issues with optimal capital allocation.  Source: XTB Research

Chart of Wolfspeed (WOLF.US) stock, D1 timeframe. Today's increase in the company's stock price lifted it towards a significant resistance level defined by the 200-day exponential moving average (golden curve). Source: xStation 5.