Keep a close eye on shares of Wolfspeed (WOLF). Its latest deal to provide silicon carbide (SiC) chips for BorgWarner’s (BWA) next generation of EV power could be a real game changer. It could also put Wolfspeed’s technology to work on a problem automakers have every reason to solve: getting more out of an electric vehicle’s battery. Consider this. An electric vehicle doesn’t use every bit of its battery’s energy to move. In fact, some is lost as heat as electricity passes through power systems. That’s where SiC can help.
www.barchart.com Not only can those chips help reduce energy losses compared with traditional silicon chips, which leaves more energy to power the vehicle, but they can also handle higher voltages. Think about it this way: drivers want to travel farther between charging stops. Improving the electronics that manage battery power gives manufacturers another way to pursue that goal.
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BorgWarner Is Putting Wolfspeed’s Technology to Work
BorgWarner plans to use Wolfspeed’s chips in its new 800-volt inverter platform. An inverter takes electricity from the battery and converts it into the form the motor needs. It also helps control the power delivered to the motor as the driver accelerates. That makes it an important part of how an electric vehicle runs.
For BorgWarner, a multiyear agreement helps secure access to essential components, such as SiC. After all, the global SiC market is experiencing substantial growth thanks to a shift towards higher-efficiency power electronics. Granted, Wolfspeed did not disclose the agreement’s dollar value, purchase volumes, or a detailed delivery schedule. However, the broader market offers room for growth. MarketsandMarkets projects that the silicon carbide electronics market could expand from $3.83 billion in 2025 to $12.03 billion by 2030.
A Bigger EV Market Could Expand the Opportunity
There is also a larger reason to watch this relationship. The International Energy Agency (IEA) projects that electric vehicles could account for around half of global car sales by 2035. More EVs on the road could mean more demand for the chips and equipment that power them. Wolfspeed has an opportunity to participate in that growth through customers such as BorgWarner. However, it’s not just EVs that could drive Wolfspeed growth. The company is also expanding its role in the AI and hyperscale data market by supplying SiC technology to help cut costs, improve thermal issues, and allow for 800 VDC (volt direct current) power architectures, an emerging standard for AI data centers.
In addition, the company received a $1.5 billion, 30-year conditional loan commitment from the U.S. Department of Defense (DoD). That deal is intended to support the development of SiC minerals and upgrade its gallium nitride epitaxy capabilities. As quoted by Seeking Alpha, “SiC and GaN have critical national security applications,” said Wolfspeed CEO Robert Feurle. “With this financing, the company would be well positioned to not only continue to serve the DoW [sic] but also expand its capabilities for the benefit of U.S. national security as a whole.”
What Do Analysts Say About WOLF Stock?
Overall, Wolfspeed has a consensus “Hold” rating on Wall Street. Of the three analysts covering WOLF stock, all have a “Hold” rating. The mean, low, and high-end targets all share the same price of $25, implying a potential upside of about 11% from its current price of about $22.67.
Wolfspeed has an opportunity to turn demand for more efficient power systems into a stronger business. The BorgWarner agreement offers a reason to watch, but the real test will be how that relationship translates into sales and profits. For investors, the next few earnings reports should help clarify the picture. Rising revenue, better factory efficiency, and improving margins would strengthen the case for WOLF. Until then, the company has an interesting growth story.
www.barchart.com On the date of publication, Ian Cooper did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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