What Happened: Lead analyst at New Street Research, Pierre Ferragu, however, says this is a positive announcement for silicon carbide and not a negative.

In a Twitter thread posted on Thursday, Pierre explained that the pure Silicon Carbide inverter in Model 3 is worth about $500. Model 2, a lower-end vehicle in the works, will combine $125 of Silicon Carbide with IGBT mosfets to cut costs.

However, this hybrid architecture is only for low-end vehicles and is not applicable to Model 3 or above. For Model 3 and other high-end vehicles, 100% silicon carbide is economically viable and ensures higher performance and range, Ferragu said in a series of tweets.

See also: Everything You Need to Know About Tesla Stock

“The hybrid model expands the addressable market of silicon carbide, making it viable for the low end of the market. This is a positive for silicon carbide, not a negative!,” Ferragu tweeted.

Why Is This Important: After Tesla’s Vice President of Powertrain Engineering Colin Campbell said the company's next-gen drive unit will use 75% less silicon carbide, WolfSpeed (NYSE:WOLF) stock tumbled.

Wolfspeed manufactures semiconductors made with silicon carbide and gallium nitride materials. Shares of chipmakers ON Semiconductor (NASDAQ:ON) and ST Microelectronics also fell likewise.

Campbell added that the company's next powertrains will use a permanent magnet motor, devoid of rare metals. Rare metal producers like MP Materials (NYSE:MP) also dived following the announcement.

Also Read: Why WolfSpeed Stock Is Tumbling — Is Tesla’s Executive’s Comment Behind The Plunge?