Why Wolfspeed Stock Skyrocketed Today

Woflspeed (NYSE: WOLF) stock scored another round of huge gains Thursday. The silicon carbide (SiC) specialist's share price rocketed 16.7% higher in the daily session. Meanwhile, the S&P 500 index fell 0.3%, and the Nasdaq Composite index fell 0.1%.

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Wolfspeed stock soars as company reduces debt

Wolfspeed confirmed today that the corporate restructuring it completed after emerging from bankruptcy protections had resulted in the company's debt load being reduced by 70%. On the other hand, Wolfspeed's debt reduction was already something that investors broadly anticipated. While the reduction of debt is a positive development for the new corporate entity, the gains that it saw today in response to an already expected development may indicate that meme stock trading was a driving factor in the gains.

Wolfspeed rallies as U.S.-China dynamics come back into focus

China will be limiting its exports of rare-earth minerals. Securing access to rare-earth minerals has been a key priority in U.S. attempts to negotiate a trade deal with China.

If relations between the U.S. and China continue to worsen, Wolfspeed could face less competition from Chinese SiC providers. Some investors are also betting that SiC chips could play a bigger role in powering data centers for artificial intelligence (AI) and other applications that result in subsidies from the U.S. government. While excitement surrounding these catalysts could continue to help lift Wolfspeed stock, the current margins generated by the company's SiC products make the stock a very risky investment.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Wolfspeed. The Motley Fool has a disclosure policy.