Technology

Prediction: This Semiconductor Stock Will Be the Best Performer in 2025

Trey Thoelcke

Published: January 24, 2025 8:20 am

Semiconductor maker Nvidia Corp. (NASDAQ: NVDA), which is clearly the poster child for artificial intelligence stocks, is up more than 2,200% in the past five years. Analysts expect semiconductor stocks overall to outperform with double-digit percentage growth this year. But in the past few months, the market has taken some of the wind out of the sails of Nvidia and most of the rest of the Magnificent 7 stocks. Nervous investors now may wonder if chip stocks are still a good bet for this year and beyond.

Wall Street does not seem to have lost faith. Here are some semiconductor stocks for which analysts have big expectations. While giants like Nvidia and Intel Corp. (NASDAQ: INTC) are not on this list, there are plenty worth a look.

So, as far as Wall Street is concerned, Wolfspeed is the semiconductor stock with the greatest potential upside in the coming year. Does that mean that its shares are undervalued? Or perhaps has one overzealous analyst skewed the mean?

Why Invest in Wolfspeed?

Wolfspeed stock traded for more than $140 a share in late 2021, which was almost 2,500% more than its IPO price. The company is a global leader in silicon carbide (SiC) technology, which is used in various applications, including electric vehicles, renewable energy, and data centers. It received a U.S. CHIPS Act grant, and its electric vehicle (EV) inverter won an award in 2016. And it has a global partnership with FIRST Robotics, an international not-for-profit organization that focuses on STEM learning. Yet, weakening demand has weighed on the stock for the past two years. Shares hit a multiyear low below $5 recently but some analysts appear to see recovery potential.

Wolfspeed, the Company

This American developer and manufacturer of wide-bandgap semiconductors focuses on silicon carbide and gallium nitride (GaN) technologies in Europe, Hong Kong, China, rest of Asia-Pacific, the United States, and elsewhere. It offers silicon carbide and GaN materials, including silicon carbide bare wafers, epitaxial wafers, and GaN epitaxial layers on silicon carbide wafers to manufacture products for radio frequency (RF), power, and other applications.

The company also provides power devices, such as silicon carbide Schottky diodes, metal oxide semiconductor field effect transistors (MOSFETs), and power modules for customers and distributors to use in applications, including electric vehicles comprising charging infrastructure, server power supplies, solar inverters, uninterruptible power supplies, industrial power supplies, and other applications.

In addition, it offers RF devices comprising GaN-based die, high-electron mobility transistors, monolithic microwave integrated circuits, and laterally diffused MOSFET power transistors for telecommunications infrastructure, military, and other commercial applications.

General Motors, Mercedes-Benz, and the U.S. military are among its customers.

Wolfspeed headquarters are in Durham, North Carolina. The company was founded in 1987 as Cree Research. It went public in early 1993 and changed its name to Wolfspeed in October 2021. It competes with or is similar to, among others:

• Himax Technologies Inc. (NASDAQ: HIMAX)
• Impinj
• Kulicke and Soffa Industries Inc. (NASDAQ: KLIC)
• ON Semiconductor
• Semtech Corp. (NASDAQ: SMTC)

Wolfspeed is undergoing a restructuring, which included a recent leadership change, abandoning plans for a factory in Germany, layoffs, and a lower revenue forecast. Last fall, the company secured a $750 million grant under the CHIPS Act and another $750 million in other financing for expansion. Look for its fiscal second-quarter report on January 29.

Wolfspeed, the Stock

The multiyear low of $4.66 a share was seen last week, but the stock has popped more than 37% since then, though it has still underperformed the Nasdaq and the S&P 500 year to date. Note that the $13.01 consensus price target is well below the 52-week high of $37.29. Yet it indicates that analysts see some room to run in the next 12 months. When it comes to ratings though, analysts remain cautious. Of the 17 analysts who cover the stock, 10 of them have Hold ratings. However, Goldman Sachs reiterated its Buy rating after that multiyear low was put in.

The company has been targeted by activist hedge funds, and institutional investors hold around 94% of the shares. BlackRock and Vanguard are beneficial owners, and T. Rowe Price and State Street also have notable stakes. Short sellers hold more than 36 million shares, or about 29% of the float. Several insiders, including the board chair, bought shares back in November.

Wall Street Expectations

Wall Street expectations for where the stock goes in the next 52 weeks vary. At least one analyst sees only marginal upside. Overall, though, expectations are high. Meeting the mean price target means the share price would more than double in the coming year.

Despite caution in terms of ratings and earnings estimates, Wall Street so far seems optimistic when it comes to price targets. The company will need to provide evidence in its upcoming results that it is getting its ducks in a row with the restructuring and funding infusion. Analysts also may be waiting to see how things shake out in Washington before boosting ratings.

For prospective investors, Wolfspeed stock may be a bit speculative for now, but the payoff could be quite generous.

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