Why Wolfspeed Stock Is Soaring Today

Wolfpseed (NYSE: WOLF) stock is making big gains again in Monday's trading. The chip specialist's share price was up 14.4% as of 1:30 p.m. ET. Meanwhile, the S&P 500 index was up 0.2%, and the Nasdaq Composite index was up 0.9%.

While there isn't any business-specific news pushing Wolfspeed stock higher today, the company's valuation is climbing in conjunction with meme-stock momentum and a bullish backdrop for the broader market. The company's share price is now up roughly 30% over the last week of trading.

Meme-stock momentum lifts Wolfspeed

Wolfspeed has attracted attention as a meme-stock play in recent months. The company's valuation then surged at the end of November after filings with the Securities and Exchange Commission (SEC) revealed that four members of the company's board of directors had acquired substantial amounts of stock. The chip specialist's CEO also stepped down near the time when the board directors were acquiring stock, and the company has announced that it has started the process of finding a new leader for the business.

With insiders buying shares and the company still in the early stages of substantial turnaround initiatives, some investors have been pouring into Wolfspeed with the hopes that it will prove to be an explosive comeback stock. Even with recent gains, the company's share price is down roughly 75% year to date.

What's next for Wolfspeed stock?

The meme-stock momentum has been complemented by expectations that macroeconomic and political conditions could shift in favorable directions. While the exact timeline of the Federal Reserve's potential actions continues to be debated, many investors expect that the central banking authority will continue to reduce interest rates. Investors are also betting that the incoming Trump administration will bring a new round of corporate tax cuts and a more lax regulatory backdrop. All of those dynamics could help to create bullish momentum for riskier, speculative stocks.

On the other hand, investors should keep in mind that long-term performance for Wolfspeed stock still hinges on whether the company can make its turnaround plans a reality. The tech specialist has landed some significant design wins recently, but it's still moving through a restructuring that will see it exit or significantly reduce some operations -- and efforts to refocus the core business on profitable silicon carbide products will likely hinge on the overall demand backdrops across electric vehicle, energy, and industrial markets.

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