– Cambricon’s stock surged to ¥1,329, just ¥90 behind Kweichow Moutai, fueled by explosive revenue growth and AI chip demand.
– Historical ‘second-place curse’ saw previous high-flyers like Flytech and Stone Tech crash after challenging Moutai.
– Cambricon’s profitability turnaround and domestic substitution trends are key drivers, but high PE ratios pose risks.
– Analyst targets reach ¥1,835, but sustainability hinges on execution and policy support amid US chip restrictions.
– Investors must weigh AI optimism against lessons from past A-share bubbles.
As of August 26, 2025, Cambricon (688256.SH) closed at ¥1,329 per share, a mere ¥90.61 away from dethroning Kweichow Moutai (600519.SH) as China’s highest-priced A-share stock. This nail-biting gap has ignited market frenzy, with investors questioning whether the AI chipmaker can shatter the notorious ‘second-place curse’—a historical pattern where stocks nearing or surpassing Moutai’s price eventually plummet. Cambricon’s staggering 4,347% revenue growth in H1 2025 and its newfound profitability have fueled its ascent, but skeptics point to its sky-high valuation and the ghosts of fallen predecessors. In this analysis, we explore Cambricon’s trajectory, the curse’s origins, and whether this time is truly different.
The Rise of Cambricon: From Losses to Lofty Heights
Cambricon’s journey to the cusp of A-share supremacy is a tale of radical transformation. Once a perennial loss-maker, the company reported a net profit of ¥10.38 billion in H1 2025, reversing years of deficits. Revenue exploded to ¥28.81 billion, up 4,347% year-over-year, driven by demand for its AI chips amid China’s push for technological self-reliance.
Key Performance Milestones
– Q4 2024: First quarterly profit (¥2.72 billion net income)
– Q1 2025: Revenue surged 4,230% to ¥11.11 billion
– August 2025: Stock breached ¥1,000, peaking at ¥1,391
The rally accelerated in August, with shares gaining 87% month-to-date, including two 20% daily limits. Goldman Sachs raised its target price to ¥1,835, citing expanded R&D and cloud vendor investments. However, with a forward PE of 343—far above the sector median of 73—valuation concerns loom large.
The ‘Second-Place Curse’: A History of Fallen Giants
Since the 1990s, A-shares have witnessed multiple stocks challenge Moutai’s price dominance, only to collapse. This phenomenon, dubbed the ‘second-place curse,’ stems from speculative bubbles, unsustainable fundamentals, or post-split dilution.
Notable Victims
– Flytech (now Zhonganke): Peaked at ¥3,550 in 1992 (unadjusted), now trades at ¥3.77.
– Vacuum Electron (now Yunsai Zhilian): Hit ¥2,587.5 in 1992, later reversed.
– Stone Tech (688169.SH): Reached ¥1,494.99 in 2021, now at ¥208.5 amid profit declines.
– Imeik (300896.SZ): Topped ¥1,338.88 in 2021, fell to ¥197.70 after H1 2025 profit dropped 30%.
– Heima (688032.SH): Peaked at ¥1,338.88 in 2022, now at ¥113.80 after quarterly losses.
Common threads include profit erosion post-rally, as seen with Stone Tech’s 39.55% H1 net income drop, and overheated valuations. Even non-tech names like China Shipbuilding and Changchun High-Tech succumbed after briefly overtaking Moutai.
Drivers Behind Cambricon’s Surge
Two factors underpin Cambricon’s meteoric rise: operational turnaround and geopolitical tailwinds.
Profitability and AI Demand
Cambricon’s shift to profitability aligns with global AI adoption. Its self-developed instruction sets and microarchitectures bypass US restrictions on chips like Nvidia’s A100 and H800, positioning it as a domestic alternative. Cloud providers’ capital expenditure hikes further buoy demand.
Domestic Substitution Policy
US export curbs on high-performance AI chips have forced Chinese firms to seek local options. Zhejiang Securities notes this creates a ‘substitution window,’ with policy support ensuring long-term viability. Despite potential competition from exported H20 chips, Cambricon’s proprietary tech offers insulation.
Valuation Warnings and Market Realities
Cambricon’s PE ratio of 343 signals extreme optimism. Historical comparables like Imeik and Stone Tech traded at similarly elevated multiples before corrections. Risks include:
– Dependency on policy continuity
– Execution risks in scaling production
– Potential US policy shifts (e.g., eased restrictions)
Goldman’s upgraded forecasts assume sustained AI chip shipments, but any demand slowdown could trigger a rerating.
Can Cambricon Escape the Curse?
Breaking the ‘second-place curse’ requires more than momentum—it demands enduring fundamentals. Cambricon’s advantages include:
– First-mover status in AI chips
– Government backing for semiconductor independence
– Revenue diversification beyond gaming (e.g., cloud, IoT)
However, history cautions that hype often outpaces reality. For every Moutai—a profit-consistent icon—dozens of pretenders have faltered.
Strategic Implications for Investors
Investors should balance optimism with discipline:
– Monitor quarterly profit margins for sustainability
– Watch for dilution events (e.g., share placements)
– Assess competitive threats from rivals like Huawei’s Ascend
Long-term holders might see policy tailwinds, but traders must heed volatility warnings.
Cambricon stands at a crossroads: defy history through execution or become another cautionary tale. Its success hinges on converting AI promise into lasting profits—a challenge where predecessors failed. For investors, the lesson is clear: chase trends, but anchor decisions in fundamentals. As the ‘second-place curse’ looms, due diligence remains the best antidote.
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