Cambricon Technologies, a Chinese AI chipmaker, has seen its stock price rise nearly 10x in the past two years amid speculation that it could challenge Nvidia in China’s market.

The company, founded in 2016 by brothers Chen Yunji and Chen Tianshi, designs AI chips for cloud servers, edge devices, and data centers.

Cambricon’s shares are trading at a trailing 12-month price-to-earnings ratio above 4,000, far higher than Nvidia’s ratio of under 60.

Analysts say the surge in Cambricon’s valuation is driven by expectations of strong domestic AI demand and China’s push to build an independent AI ecosystem.

Cambricon is reportedly developing its Siyuan 690 chip, which is expected to follow the Siyuan 590 series released in 2023 and could reach performance levels close to Nvidia’s H100.

The company’s founders previously worked at the Chinese Academy of Sciences.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Extreme valuations reflect geopolitical premium over financial fundamentals

Cambricon’s valuation highlights how geopolitical factors can influence stock prices beyond traditional financial metrics.

The company trades at a trailing 12-month price-to-earnings ratio above 4,000, compared to Nvidia’s ratio under 601.

Despite achieving its first quarterly profit only in late 2024, Cambricon’s market capitalization reached approximately $37 billion23.

This gap between valuation and fundamentals suggests that investors are factoring in China’s strategic need for semiconductor independence rather than current financial performance.

The company’s revenue of ¥1.2 billion ($163.7 million) in 2024, while growing 70% year-over-year, remains modest compared to its significant market value23.

Such valuations often indicate that investors are anticipating transformational growth driven by policy support and market protection rather than purely organic business development.

2️⃣ China views AI chips as a leapfrog opportunity in semiconductor development