The Specter of China’s Stock Market Legends
China’s stock market has seen numerous companies hailed as ‘the next big thing’ only to falter dramatically. During the 2015 bull market, CITIC Securities briefly rivaled Goldman Sachs in market capitalization, while the merger of China North Rail and China South Rail created CRRC Corporation, whose valuation momentarily approached the combined worth of Airbus and Boeing. The 2020 rally spawned various ‘concept leaders’ inspired by Kweichow Moutai—from floor-sweeping robot maker Roborock to soy sauce producer Foshan Haitian Flavouring & Food Company. Now, a new contender has emerged: Cambricon, touted as China’s NVIDIA. But is this title deserved, or are investors overlooking critical warning signs?
Cambricon’s Meteoric Rise and the ‘Moutai Curse’
As of August 28, Cambricon’s stock price reached 1,587.91 yuan, surpassing even Kweichow Moutai’s 1,446.1 yuan and making it the highest-priced stock in the A-share market. Since its late-2022 lows, the stock has skyrocketed by an astonishing 33 times. However, history suggests caution. Companies that briefly overtake Moutai in share price often experience sharp declines—extreme cases like暴风科技 (Baofeng Technology) have even delisted. Why? Moutai represents rare, sustained financial growth, with net profits soaring from 330 million yuan at its 2001 IPO to 86.2 billion yuan in 2024—a 260-fold increase over 23 years. It avoids stock-splitting gimmicks, allowing its share price to reflect genuine performance growth. In contrast, rapid price surges elsewhere often outpace fundamentals, leading to corrections.
Will the ‘Moutai Curse’ Strike Cambricon?
Cambricon reported first-half 2024 revenue of 2.88 billion yuan and net profit of 1.04 billion yuan. However, this included roughly 100 million yuan in government subsidies and minimal income tax payments due to past loss carryforwards—just 99,000 yuan versus the typical 15–25% rate for profitable firms. Adjusting for these, Q2 profits approximated 700 million yuan. Assuming similar results in Q3 and Q4, full-year 2025 profits could reach 2.5 billion yuan. At a market cap of 664.3 billion yuan, this implies a P/E ratio of 266x. In other words, if profits stagnate, shareholders would need 266 years to recoup their investment—nearly the entire duration of the Ming Dynasty (1368–1644). Such valuations demand extraordinary future growth to justify.
Can Cambricon Sustain Rapid Profit Growth?
This is the multi-billion-yuan question. While China’s cloud providers are investing heavily in AI chips, and domestic LLMs like DeepSeek are optimizing for local hardware to reduce NVIDIA dependence, Cambricon faces steep hurdles. Bernstein’s July 2024 report on China’s AI chip market shares placed Cambricon fourth with just 1%, trailing NVIDIA (66%), Huawei’s Ascend (23%), and AMD (5%). IDC’s 2024 data showed NVIDIA shipping over 1.9 million units in China (70% share), Huawei Ascend at 600,000 (23%), and Cambricon a mere 26,000. Performance-wise, Pacific Securities’ April analysis noted Cambricon’s Siyuan 370 chip lacks competitive edges, and real-world performance often lags NVIDIA due to software-hardware integration issues.
The R&D Spending Chasm
NVIDIA’s FY2025 R&D budget hit $12.9 billion, AMD’s 2024 spending was $6.5 billion, while Cambricon’s 2024 R&D was 1.22 billion yuan (~$160 million)—40–80x smaller. Even with a recently approved private placement plan to invest 4.5 billion yuan over three years in AI chip/software R&D, Cambricon’s annual ~1.5 billion yuan outlay remains orders of magnitude behind. High R&D enables architectural and ecosystem improvements, driving volume production that reduces per-unit costs—a virtuous cycle where incumbents like NVIDIA strengthen their grip. Cambricon, as a challenger, lacks this flywheel effect.
Competitive and Geopolitical Risks
Beyond NVIDIA and AMD, Cambricon must contend with Huawei’s Ascend, which boasts deeper experience and resources. As a fabless designer, Cambricon also faces supply-chain vulnerabilities from U.S. semiconductor export controls—a risk heightened compared to more integrated rivals like Huawei. Supporters argue Cambricon’s 664.3 billion yuan valuation is reasonable at one-tenth of NVIDIA’s $4.4 trillion, implying further upside. Optimism reflects faith in China’s tech self-reliance, but markets are merciless: edifices built on hopes rather than earnings can collapse swiftly. As Uncle Ye in the drama ‘Blossoms Shanghai’ noted: ‘It takes an hour to run up the Empire State Building, but only 8.8 seconds to jump down. That’s the stock market. To earn from stocks, first learn to lose.’
Key Takeaways for Investors
– Cambricon’s valuation relies on explosive growth assumptions, not current fundamentals.
– Its 1% market share and R&D gap make catching NVIDIA or Huawei improbable near-term.
– Geopolitical and supply-chain risks add layers of uncertainty.
– Historical precedents like暴风科技 warn against chasing hype over substance.
– Diversification and risk management are essential when investing in high-volatility tech stocks.
Navigating the AI Investment Landscape
Cambricon symbolizes both China’s AI ambitions and the perils of speculative manias. While technological progress is real, investors must distinguish between patriotic fervor and financial reality. Before allocating capital, scrutinize financials, competitive positioning, and external risks. Consider dollar-cost averaging into broader AI ETFs rather than concentrating in single stocks, and always maintain a long-term perspective. As with帝国大厦 (the Empire State Building), the ascent requires patience, but the fall can be devastatingly quick. Stay informed, stay cautious, and remember: in markets, surviving to play another day is often the greatest victory.
Editor: Wang Yi PF220