AsianFin -- As China intensifies efforts to become self-sufficient in AI and semiconductor technologies, 2024 has seen the emergence of several "hot stocks," with AI chip leader Cambricon Technologies standing out.

On Tuesday, Cambricon’s stock saw a slight dip of 0.4%, though the broader trend in 2024 has been marked by significant volatility in China’s A-share market. However, Cambricon’s stock has bucked this trend, achieving remarkable gains.

On December 18, Cambricon’s stock surged by 8.34%, and the following day, it climbed another 6%, peaking at 654 CNY per share. Over the past four months, the stock has seen impressive increases of 12.65%, 56.87%, 23.68%, and 13.37%, respectively. Since 2023, Cambricon’s stock price has risen more than 10-fold, with a staggering 404.67% increase this year, outpacing the benchmark Shanghai-Shenzhen 300 Index, as well as global AI chip giants such as Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC).

As of now, Cambricon’s market capitalization exceeds 272.2 billion CNY (about 37 billion USD), ranking second on the STAR Market, just behind Haiguang Information, representing 4.3% of the total market capitalization of the 581 stocks listed on the board.

This meteoric rise has left investors in awe, with some expressing their amazement on stock forums, calling Cambricon the true "King of the Cold" (referring to its stock symbol, "寒武纪" in Chinese, which translates to "Cambricon").

Founded in 2016, Cambricon focuses on AI chips, with products including cloud-based intelligent chips, acceleration cards, training systems, and edge products. These chips are used across various fields such as cloud servers and data centers. The company’s business also spans IP licensing, software, and intelligent computing cluster systems.

According to its most recent financial report, Cambricon has experienced a decline in revenue due to adverse supply chain factors. The report also highlights that the company has yet to achieve profitability, facing cumulative losses primarily due to ongoing heavy investments in R&D to maintain technological advantages in a fiercely competitive market.

In early December 2024, Caixin data noted that many southern capital funds have been increasingly speculating on Cambricon, driving up its financing balance to new highs. The significant stock surge has been attributed to two main factors: collaboration with domestic AI companies, such as Fourth Paradigm, and the policy-driven acceleration of semiconductor industry localization in China.

On December 30, AI market research firm iiMedia Consulting released a report stating that China's AI large model market is expected to exceed 29.4 billion CNY in 2024, with a forecast to surpass 70 billion CNY by 2026. This rapid growth in AI-related industries, such as smart devices, electric vehicles, and artificial intelligence, is creating new opportunities for China’s semiconductor sector.

Minsheng Securities emphasized that the trend toward domestic AI chip development is undeniable, with companies like Cambricon continuing to close the gap with global leaders like Nvidia.

However, it’s crucial to note that Cambricon remains unprofitable. After debuting as the first AI chip company on the STAR Market in 2020, Cambricon’s revenue grew from 459 million CNY in 2020 to 709 million CNY in 2023, but the company has still failed to resolve its losses. Over nearly six years since 2019, the company has accumulated losses exceeding 5.27 billion CNY.

In the first half of 2024, Cambricon reported a revenue of 64.76 million CNY, down 43.42% year-on-year, with a net loss of 530 million CNY, compared to 544 million CNY in the same period the previous year. Despite this, the AI chip market’s demand has surged, with Cambricon’s sales in Q3 2024 growing over 280% year-on-year, signaling strong growth prospects for the coming year.

Cambricon is banking on the AI large model field for future growth, focusing on advanced technologies in 7nm chip design and developing new micro-architectures for intelligent processors. The company is also expanding its software training platform to support popular models like Llama3 and Alibaba’s Qwen series.

Citigroup analyst Karen Huang forecasted that domestic GPU production could see significant growth by 2025, predicting Nvidia’s market share will drop from over 80% in 2024 to 50-60%. Cambricon, as a major player in China, stands to benefit greatly from this shift.

Beyond Cambricon, 2024 has seen a broader rally in A-shares of hard-tech companies. Stocks like Hygon Information Technology, optical module maker Eoptolink, and Range Technology have all surged by over 100%. Additionally, AI-related ETFs, driven by the large-scale commercialization of smart assistants and platforms like ByteDance’s Doubao, have risen by 26%, outperforming the Shanghai-Shenzhen 300 Index by 16%.

According to market research firm Omdia, the market for GPUs and other acceleration chips used in AI and data centers is expected to slow down after rapid growth, but the sector will continue to expand, with market size projected to reach 151 billion USD by 2029.

This surge in AI and semiconductor stocks reflects China’s aggressive push towards technological self-sufficiency, particularly in the semiconductor industry, and the increasing role of homegrown companies like Cambricon in the global market.

(1 USD equals 7.3 CNY)