Tesla (NASDAQ:TSLA) revealed its “Master Plan” for the company yesterday. TSLA stock is down today, but there’s also collateral damage. Wolfspeed (NYSE:WOLF) stock is also falling because Musk revealed Tesla’s intention to use less silicon carbide in future versions of its electric vehicles (EVs).
That’s potentially bad news for Wolfspeed, a semiconductor manufacturer that provides silicon-carbide chips. These types of chips are sometimes used in EVs because they tend to be heat-resistant.
Here’s the problem for Wolfspeed. Apparently, Tesla found a way to use less silicon carbide in its EVs. Furthermore, Tesla indicated it’s preparing to deploy a powertrain in its vehicles that would reduce the need for silicon carbide by a whopping 75%.
Colin Campbell, Tesla’s president for powertrain engineering, reportedly called silicon carbide an “amazing semiconductor,” but also said it’s expensive and “really hard” to scale. It’s not hard to connect the dots here and figure out why investors of Wolfspeed, a silicon-carbide chip manufacturer, would respond negatively to this development.
What’s Happening with WOLF Stock?
TSLA stock dropped 5% today, but that’s nothing compared to WOLF stock’s early-morning decline of 11% to 12%. This move brings the Wolfspeed share price close to its 52-week low of $58.07.
This might seem like a grim situation for Wolfspeed. However, at least one analyst group on Wall Street isn’t overly worried.
Analysts with Roth MKM suggest there’s a “good chance” Tesla’s claims about silicon carbide might not materialize. Moreover, analyst Craig Irwin observed that Tesla “has a history of overstatement.” Irwin concluded, “…in all likelihood this claimed improvement in heat extraction (packaging technology) accelerates industry adoption to WOLF’s benefit.”
In other words, Wolfspeed might not be negatively affected in the long run. Plus, the company may even benefit from Tesla’s claimed innovation. That remains to be seen, of course. So far, it appears that WOLF stock traders aren’t particularly optimistic about Wolfspeed and the silicon-carbide market.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.