– A loss-making AI chip firm, Cambricon, surged 25x in 2.5 years, overtaking Kweichow Moutai as China’s highest-priced stock.
– Geopolitical tensions and China’s ‘AI+’ policy fueled its explosive growth, with revenue jumping 4,347% YoY in H1 2025.
– Institutional investors are divided: passive funds pile in, while active funds grapple with valuation fears and long-term potential.
– Risks remain—sky-high valuations, technological gaps, and sustainability questions loom over its ‘A-Share King’ status.
– Cambricon symbolizes a broader shift in China’s market narrative, from consumption-driven equities to tech and innovation.
The Crowning of a New A-Share King
On August 28, 2025, Cambricon, a once-obscure AI chipmaker, closed at ¥1,587.91 per share, decisively ending Kweichow Moutai’s 2,786-day reign as China’s highest-priced stock. This wasn’t just a symbolic shift—it marked a fundamental rewrite of A-share valuation logic, where future potential trumped present profitability. For years, Cambricon (stock code: 688256.SH) carried the ‘U’ suffix, denoting ‘unprofitable.’ Yet, capital flooded in, betting big on AI sovereignty and homegrown tech prowess.
The Geopolitical and Policy Tailwinds
Cambricon’s ascent is inextricably linked to global tech tensions. As U.S. restrictions on AI chip exports to China tightened, domestic alternatives gained urgency. Beijing’s ‘Artificial Intelligence Plus’ action plan, unveiled in August 2025, set ambitious goals: 70% adoption of AI terminals and agents by 2027, scaling to 90% by 2030. This policy windfall, coupled with a compute infrastructure push led by officials like Vice Minister of Industry and IT Xiong Jijun (熊继军), created ideal conditions for Cambricon’s rise.
The Capital Frenzy: Passive Flows and Active Gambles
Institutional dynamics played a pivotal role. Index inclusions—first in the STAR 50, then the CSI 300, and finally the SSE 50—triggered massive passive fund buying. By H1 2025, four index ETFs, including ChinaAMC SSE STAR 50 ETF and E Fund SSE STAR 50 ETF, ranked among its top-10 holders.
The Active Fund Divide
Active managers, however, were torn. In Q2 2025, 259 funds increased positions, while 119 reduced stakes. Some, like Hu Yibin (胡宜斌) of HuaAn Fund, went all-in, calling Cambricon a bet on ‘national strategy.’ Others, like Mo Haibo (莫海波) of Wanja Fund, cashed out after a long hold. The dichotomy underscored a deeper tension: chasing the ‘Chinese Nvidia’ dream while fearing a valuation bubble.
Unpacking the ‘Reverse Takeover’ Formula
Cambricon’s turnaround wasn’t accidental. Its founder Chen Tianshi (陈天石), an alumnus of the Chinese Academy of Sciences, laid early groundwork with the ‘DianNao’ architecture—a pioneering deep learning processor design cited even by Nvidia. Years of R&D, backed by investors like Yuanhe Origin Capital, iFlytek, and Alibaba, finally paid off as AI inference demand exploded.
The Financial Leap
H1 2025 results were staggering: revenue hit ¥2.88 billion (up 4,347% YoY), with net profit at ¥1.04 billion—a sharp reversal from 2024’s losses. Cloud chips drove 99% of sales, buoyed by products like the Siyuan 590, a 7nm chip rivaling Nvidia’s A10 in efficiency.
Valuation Realities and Hidden Thorns
Yet, risks abound. At 5,117x P/E and 114x P/B, Cambricon dwarfs sector averages (89x and 6x, respectively). Its tech still trails global leaders, and profitability must be sustained beyond policy hype. As Goldman Sachs raised its target to ¥1,835, it baked in aggressive 2030 revenue assumptions—a high bar.
The Broader Market Implications
Cambricon’s crown symbolizes a historic pivot: from the ‘Moutai era’ of consumption to a tech-driven A-share market. Like the U.S. transition from Exxon and Coca-Cola to the ‘Magnificent Seven,’ China is embracing hard tech as a core valuation driver.
Navigating the Future: Tech Faith Versus Fundamentals
For investors, the playbook has changed. As Meng Jie (孟杰) of Manulife Fund notes, focus on ‘order stability and technological moats’—not hype. Xingzheng AM’s Zheng Fangbiao (郑方镳) argues AI is a decade-long theme, but selectivity is key.
Cambricon’s journey is more than a stock story; it’s a referendum on China’s tech ambitions. While the road ahead is fraught with volatility, its rise underscores a new paradigm: in the age of AI, chips are the ultimate hard currency. For market watchers, the lesson is clear—understand the geopolitics, policy, and tech trends shaping tomorrow’s winners. Dive deeper, stay skeptical, but don’t ignore the transformation underway.