Changpeng Wan
Summary
Here are the key points from Shenghong Technology’s remarkable journey and controversial moves:
– Shenghong’s stock price skyrocketed over 500% in 2025, largely driven by its perceived connection to NVIDIA’s AI infrastructure supply chain
– The PCB manufacturer achieved Tier 1 supplier status for NVIDIA’s AI accelerator cards and server products, though the exact relationship remains undisclosed
– Company executives, including founder Chen Tao and his wife Liu Chunlan, cashed out approximately $300 million (2.1 billion yuan) through stock sales during the price surge
– Despite impressive revenue growth and profitability improvements, Shenghong faces significant debt obligations exceeding its cash reserves
– The Hong Kong IPO comes amid concerns about customer concentration and whether the company can maintain its explosive growth beyond the NVIDIA partnership
The Meteoric Rise of a PCB Specialist
Shenghong Technology has become one of the most dramatic success stories in China’s technology manufacturing sector. Founded in 2006 by Chen Tao, who rose from humble beginnings in Gansu province to build a multi-billion dollar enterprise, the company specializes in producing high-precision multilayer printed circuit boards (PCBs) and HDI PCBs essential for advanced computing equipment.
The company’s fortunes changed dramatically when it entered NVIDIA’s supply chain for AI accelerator cards and servers. From its 2015 Shenzhen Stock Exchange debut at modest valuations, Shenghong saw its market capitalization explode to over $30 billion (220 billion yuan) by August 2025, making it one of the most valuable PCB manufacturers globally.
This spectacular growth trajectory represents both the opportunities and volatility inherent in technology supply chains, particularly those connected to the artificial intelligence boom. As NVIDIA’s dominance in AI chips continues, companies like Shenghong that successfully integrate into their ecosystem can experience extraordinary valuation expansion.
Financial Performance Breakthrough
Shenghong’s financial metrics tell a story of accelerating growth. Revenue increased from $1.1 billion (7.885 billion yuan) in 2022 to $1.5 billion (10.731 billion yuan) in 2024, representing 35.3% year-over-year growth in 2024. More impressively, net profit jumped 72% in 2024 to $160 million (1.154 billion yuan), indicating not just top-line growth but significantly improved profitability.
The first quarter of 2025 showed even more dramatic improvement with revenue surging 80.3% year-over-year to $600 million (4.312 billion yuan) and net profit exploding by 339.2% to $128 million (921 million yuan). This acceleration was primarily driven by HDI product sales, which grew from 26 million units in Q1 2024 to 165 million units in Q1 2025 – a staggering 533% increase.
Profitability metrics likewise showed substantial improvement. Gross margins expanded from 18.1% in 2022 to 33.4% in Q1 2025, while net margins jumped from 10.0% to 21.3% over the same period. This margin expansion suggests Shenghong has achieved both operational efficiencies and pricing power within its product categories.
The NVIDIA Connection: How Deep Does It Really Go?
The cornerstone of Shenghong Technology’s valuation explosion has been its association with NVIDIA, though the exact nature of this relationship remains somewhat opaque. The company established its HDI division in 2019 and reportedly entered NVIDIA’s supply chain for H-series AI accelerator cards in 2023. By 2024, Shenghong had apparently achieved Tier 1 supplier status through NVIDIA’s GPU200 product certification.
Despite this purported close relationship, Shenghong’s filings carefully avoid explicitly naming NVIDIA. The company describes itself as a “core PCB supplier to a global leader in artificial intelligence computing infrastructure” whose products are “deeply applied in its AI computing cards, AI servers, and high-end graphics cards.” This cautious language suggests either contractual limitations on disclosure or perhaps a less exclusive relationship than investors might assume.
Decoding the Customer Relationships
Shenghong’s customer disclosure reveals interesting patterns. Their largest customer (Customer A) is described as a “large global electronics OEM manufacturer headquartered and listed in Taiwan” – which likely refers to companies like Foxconn or Quanta Computer rather than NVIDIA directly.
The fifth-largest customer (Customer E), contributing 2.1% of revenue or approximately $12.5 million (89.5 million yuan) in Q1 2025, matches NVIDIA’s profile as a “Nasdaq-listed U.S. company focused on accelerated computing and AI infrastructure.” This suggests that while NVIDIA might be an important strategic partner, it may not represent the overwhelming revenue source that the market has priced into Shenghong’s stock.
What concerns analysts is the rapidly increasing customer concentration. While Shenghong’s top five customers represented 25-28% of revenue from 2022-2024, this figure jumped to 51.0% in Q1 2025, with the largest single customer accounting for 33.6% of total revenue. This creates significant vulnerability if relationships with any major customer deteriorate.
The Executive Cash-Out: Smart Planning or Red Flag?
Between May and August 2025, Shenghong’s founders and executives executed a series of stock sales that netted approximately $300 million (2.1 billion yuan). The selling began with Shenhua Xinye – a vehicle controlled by founder Chen Tao (90%) and his wife Liu Chunlan (10%) – which sold 25.73 million shares (3% of total equity) at $9.25 (65.85 yuan) per share in May, raising approximately $238 million (1.694 billion yuan).
As the stock continued climbing to over $36 (259 yuan) per share by August, five executives including Liu Chunlan, President Zhao Qixiang, Vice President Chen Yong (Chen Tao’s brother), Executive VP Wang Hui, and CFO Zhu Guoqiang sold an additional 2.37 million shares, realizing approximately $63 million (450 million yuan) at significantly higher prices.
This substantial insider selling occurred alongside company statements about being “undervalued” compared to Taiwanese NVIDIA suppliers trading at 40x earnings multiples. Founder Chen Tao publicly stated in July that Shenghong’s 15-16x P/E ratio was “relatively low,” even as insiders were actively reducing their positions.
Balancing Corporate and Personal Interests
Insider selling always creates tension between legitimate personal financial planning and potential signaling about company prospects. Shenghong executives cited “personal funding needs” as the reason for their sales, which isn’t inherently suspicious given the extraordinary appreciation they’ve experienced.
However, the timing relative to the Hong Kong IPO creates awkward optics. Selling substantial positions immediately before seeking new public investors could be interpreted as lacking confidence in the company’s ability to maintain its valuation levels. This is particularly sensitive given that the company simultaneously pursued a $262 million (1.9 billion yuan) private placement for expansion projects in Vietnam and Thailand.
The concentration of selling among the founding family (Chen Tao, his wife, and his brother accounted for the majority of sales) adds another layer of concern about corporate governance practices and alignment with minority shareholders.
Financial Health Behind the Spectacular Growth
Beneath the impressive growth numbers, Shenghong Technology faces some financial challenges that help explain its urgent pursuit of additional capital through both private placement and Hong Kong listing.
Despite generating strong profits, the company reported cash and equivalents of approximately $130 million (927 million yuan) at year-end 2024, against short-term borrowings of $266 million (1.9 billion yuan) due within one year. This liquidity gap necessitates either continued strong operational cash flow or external financing to meet obligations.
The company also carries significant goodwill from acquisitions – approximately $171 million (1.22 billion yuan) as of March 2025, representing 5.81% of total assets. This includes $164 million (1.17 billion yuan) from acquiring PSL in 2023 and $6.6 million (46.9 million yuan) from acquiring Thailand Shenghong in 2024. Any impairment of these assets would directly impact profitability.
The Global Expansion Strategy
Shenghong’s expansion plans reveal ambitious globalization intentions. The company is investing approximately $448 million (3.2 billion yuan) in production facilities in Vietnam and Thailand, with $266 million (1.9 billion) coming from the private placement and the remaining $182 million (1.3 billion yuan) requiring additional financing.
The Vietnam project focuses on AI HDI products, while the Thailand facility will produce high-layer count PCBs. Both locations offer potential advantages including lower production costs, diversification from China-based manufacturing, and possibly favorable treatment for exports to certain markets.
These expansion plans align with the company’s shifting revenue geography. While international markets (outside mainland China) already accounted for 60-62% of revenue from 2022-2024, this increased to 78.4% in Q1 2025, suggesting both strong global demand and successful penetration of international supply chains.
The Hong Kong IPO: Strategic Move or Necessity?
Shenghong Technology’s decision to pursue a Hong Kong listing creates a dual-listing structure alongside its existing Shenzhen exchange presence. This “A+H” share structure offers several potential benefits, including access to international capital, currency diversification, and enhanced global visibility.
The company plans to use IPO proceeds for domestic capacity expansion through automation equipment, global manufacturing expansion in Thailand and Vietnam, research and development initiatives, and general working capital purposes. This suggests the offering is primarily funding growth rather than providing exit opportunities for existing shareholders.
From a strategic perspective, the Hong Kong listing could help Shenghong build its international profile as it seeks to diversify beyond its current customer concentration. The timing, however, raises questions given the recent insider selling and whether current valuations are sustainable.
Market Reception and Investor Concerns
The investment community has expressed mixed reactions to Shenghong’s rapid valuation increase and subsequent capital raising activities. On investor platforms, some have directly questioned whether the company might be trying to suppress its share price to facilitate cheaper financing through the private placement.
Company management has responded with standard assurances about focusing on long-term value creation rather than short-term price movements. The official response stated: “Secondary market stock price fluctuations are affected by multiple factors. The company始终专注于自身经营发展，努力提升业绩表现，为股东创造长期价值” (always focuses on its own operational development, strives to improve performance, and creates long-term value for shareholders).
Analysts remain divided on whether Shenghong represents a legitimate long-term play on AI infrastructure or a speculative bubble fueled by NVIDIA mania. The company’s future success likely depends on its ability to develop sustainable technological advantages beyond its current flagship products and diversify its customer base beyond the current concentrated structure.
Sustainable Growth or AI Bubble Beneficiary?
Shenghong Technology stands at a critical juncture. The company has unquestionably benefited from the artificial intelligence boom and its association with NVIDIA, but whether it can build enduring value beyond this cyclical tailwind remains uncertain.
The PCB industry is notoriously competitive with thin margins typically, making Shenghong’s recent profitability expansion particularly notable but also potentially vulnerable to competition and pricing pressure. The company’s significant investments in Vietnam and Thailand suggest confidence in maintaining its technological edge and cost advantages.
For investors, the key questions revolve around customer concentration risk, the sustainability of current margin levels, and whether the company can continue innovating to stay ahead of competitors. The insider selling patterns, while explainable as personal financial planning, understandably give pause to potential new investors considering the Hong Kong offering.
As Shenghong moves forward with its dual-listing strategy, market participants will be watching closely to see if the company can translate its NVIDIA-associated success into a broader, more diversified business capable of thriving across multiple technology cycles rather than just riding the current AI wave.
The coming quarters will be critical for demonstrating whether Shenghong Technology represents a fundamentally transformed industry leader or a beneficiary of extraordinary market conditions that may not be repeatable. Investors should carefully evaluate both the company’s operational execution and its capital allocation decisions, including how IPO proceeds are deployed to generate returns for new shareholders.
