We recently compiled a list of the 8 Worst Performing Tech Stocks in 2024. In this article, we are going to take a look at where Wolfspeed, Inc. (NYSE:WOLF) stands against the other Worst Performing Tech Stocks in 2024.
The Tech Sector’s Resilience Amid Economic Challenges
One of the most popular sectors of the stock market is technology. The sector boasts an impressive track record of explosive returns and the possibility of even greater returns. Likewise, the industry has lived up to expectations in 2024, going by the Nasdaq 100, rallying 21% year to date.
The impressive rally in the tech sector comes against the backdrop of investors shunning high interest rates and inflation to bet on stocks well poised to benefit from the next industrial revolution. With artificial intelligence in the early stages of development, tech stocks with exposure to the burgeoning sector have exploded, with some becoming trillion-dollar empires.
READ ALSO: 10 Most Promising Future Stocks According to Analysts and 10 Most Promising Growth Stocks According to Hedge Funds.
In a note to investors, analysts at Mizuho have already noted that generative AI “is igniting growth and disruption across multiple markets, pushing the frontiers of innovation and productivity.” That’s because AI servers are supporting the development of infrastructure that powers the AI revolution.
The rally in the technology sector has persisted even with economists and analysts questioning the global economy’s health. China’s economy is slowing down to the extent that the government, injecting some stimulus and reforms, has done little to rattle investor’s sentiments on tech stocks.
According to Ray Dalio, the founder of Bridgewater Associates, China must carry out a “beautiful deleveraging” in addition to its recent stimulus measures and reforms to avoid serious debt issues.
“I think the changes that are taking place are terrific changes, but you still have to do the debt restructuring. You need to do it correctly, and that’s as part of a restructuring. That becomes the challenging part of it. I think that will be the test,” Dalio said.
The Impact of High Interest Rates and Inflation on Tech Stocks
Likewise, the US economy has shown signs of lethargy, depicted by a slowdown in the labor and manufacturing sectors. The US Federal Reserve conducted a 50 basis point rate cut to engineer a soft landing and avert recessions, underlining that all may not be well in the world’s largest economy.
Similarly, the International Monetary Fund Managing Director Kristalina Georgieva has warned that high debt and low growth pose significant risks to the global economy, which could hit the equity markets.
While notable progress has been made in supporting the global economic recovery, the IMF chief believes there are challenges in servicing debt that could pose a significant danger to the worldwide economy.
“It’s not yet time to celebrate,” she told Karen Tso. “When we look into the challenges ahead of us, the biggest one is low growth, high debt. This is where we can and must do better,” she added.
Nevertheless, investors have continued to shrug off all these concerns, buoyed by impressive and record-breaking earnings and revenue growth in some of the biggest tech companies. Soaring geopolitical tensions in the Middle East and the uncertainty triggered by the upcoming US election have done little to sway investors’ sentiments about tech stocks.
Nevertheless, mega-cap technology stocks have started to deflate after a dazzling run. Fresh concerns about the state of the economy accompanied the most recent downturn. The valuations of formerly high-flying stocks and the market as a whole continue to be the larger challenge, though, as most economists believe there is little chance of a recession and that rate cuts from the Federal Reserve are imminent.
This is a rotation under the hood, which means that investors are moving from recent winners to names that have been underperforming. In this instance, growth stocks have generally given way to value stocks.
Likewise, amid the resilience of the broader tech sector, not all companies have delivered record-breaking results and generated significant returns for investors. As a matter of fact, some stocks have underperformed in the broader industry, shedding more than 50% in market value.
Our Methodology
To compile our list of the worst-performing technology stocks in 2024, we ranked all technology firms based on their year-to-date performance and selected the top 15 with the largest year-to-date losses. Finally, we ranked the stocks in descending order based on their year-to-date losses.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Wolfspeed, Inc. (NYSE:WOLF)
Year to Date Gain: -63.23%
Number of Hedge Fund Holders: 29
Wolfspeed, Inc. (NYSE:WOLF) has been a big disappointment, underperforming the overall market despite operating in the semiconductor sector, which has been up over the past two years amid the artificial intelligence frenzy. While the stock is down by about 63.23% for the year, it is also down by about 90% from its 2021 peak, cementing its status as one of the worst-performing tech stocks in 2024.
Wolfspeed, Inc. (NYSE:WOLF) has been investing significant money to develop into a vertically integrated silicon carbide (SiC) chip manufacturer. Despite touting its Sic capabilities and design-in victories, Wolfspeed has been sluggish in demonstrating tangible returns on all its investments. Other rivals have already been increasing their SIC revenues and profits.
The company has not generated significant returns despite investing a lot. Its operating loss for the most recent quarter was $145.9 million, and revenue was essentially flat. Additionally, management has only projected flat revenue and even greater losses for the current quarter. At the same time, the company has roughly $2 billion in cash and $6 billion in debt.
Nevertheless, analysts are optimistic about Wolfspeed, Inc. (NYSE:WOLF) ‘s long-term prospects once its 200mm wafer plant comes online. The plant is expected to draw in top silicon carbide (SiC) clients because chips made on the larger 200mm wafer are less expensive than those made on the 150mm wafers, which are currently used to produce the majority of SiC chips. According to one of the Roth analysts, some electric vehicle (EV) negotiations with SiC customers might end, which would be a significant boost and a confirmation of Wolfspeed’s technology.
According to Insider Monkey’s database, the number of hedge fund portfolios holding Wolfspeed, Inc. (NYSE:WOLF) decreased from 33 in the previous quarter to 29 by the end of the second quarter. This indicates a reduction in interest or confidence among hedge funds in Wolfspeed, Inc. during this period.
Here is what ClearBridge Growth Strategy said about Wolfspeed, Inc. (NYSE:WOLF) in its Q3 2024 investor letter:
“We exited long-time holding Wolfspeed, Inc. (NYSE:WOLF), a leading global supplier of silicon carbide substrate wafers and devices. After giving management ample time to ramp production at its new Mohawk Valley facility, we closed the position due to continued execution missteps and cyclical headwinds impacting electric vehicle, industrial and energy applications that have repeatedly pushed the company’s path to profitability further out.”
Overall WOLF ranks 1st on our list of 8 Worst Performing Tech Stocks in 2024. While we acknowledge the potential of WOLF as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WOLF, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.