Wolfspeed Inc. (WOLF) shares plummeted 10.29% on Tuesday, marking a sharp reversal from the stock's recent rally. The semiconductor manufacturer's stock had seen significant gains in previous sessions, with a 26% surge on Monday alone, but the momentum appears to have run out of steam.

The recent rally was likely fueled by a short squeeze, as Wolfspeed was reported to be "the most-shorted U.S. stock" with a short-interest ratio of 41%. However, as the short squeeze loses momentum, investors seem to be taking profits, leading to the current downturn. The sudden reversal highlights the volatile nature of short squeeze-driven rallies.

Adding to the pressure is the anticipation surrounding Wolfspeed's upcoming earnings report, scheduled for May 8. With the company specializing in wide bandgap semiconductors, which allow devices to operate at higher temperatures and voltages, investors are keenly awaiting the latest financial results. The significant price movement ahead of the earnings announcement suggests heightened market sensitivity and uncertainty about the company's performance.