In Depth: Cambricon’s Meteoric Rise Collides With Harsh Reality Check

Chinese AI chipmaker Cambricon Technologies Corp. Ltd. briefly became the most expensive stock on the Chinese mainland on August 28, 2025, fueled by heightened investor enthusiasm as China pushes for semiconductor self-sufficiency. On that day, Cambricon’s shares surged nearly 16% to a record 1,587.91 yuan ($222.32), giving it a market value of 660 billion yuan and briefly overtaking long-time price leader Kweichow Moutai Co. Ltd. Although the stock experienced volatility, falling to 1,202 yuan before rebounding to around 1,400 yuan, its rise since July exceeded 170%, with an annual increase of over 500%[para. 1][para. 2][para. 3]. Cambricon’s rally reflects broader debates about valuing China’s tech champions amid U.S.-China tech tensions, with investors betting on domestic firms to benefit from policies promoting “domestic substitution” of key technologies[para. 4][para. 5].

Policy momentum has played a key role, notably the August rollout of China’s “AI+ action plan,” aiming for widespread AI adoption across industries by 2027 and the creation of a “smart economy” by 2035. As the leading listed Chinese AI chipmaker with significant production scale, Cambricon is regarded as a primary beneficiary[para. 6]. Foreign rivals, particularly U.S. chipmaker Nvidia, face increased scrutiny; alleged “backdoor” concerns around Nvidia’s H20 chip have spurred even more Chinese firms to shift sourcing domestically, reinforcing the irreversible trend toward self-reliance[para. 7][para. 8][para. 9]. The market anticipates further growth, buoyed by speculation of large orders from companies such as ByteDance (reportedly pre-ordering 200,000 Cambricon chips), though rumors of major Alibaba Cloud orders have been denied[para. 10].

Despite strong sentiment, Cambricon contends with significant production challenges, particularly bottlenecks and low yields that may prevent it from fulfilling even a single large client's needs in a year[para. 11]. Nonetheless, institutions like Goldman Sachs remain bullish, raising the company’s 12-month price target, expecting that rising capital expenditures from Chinese cloud operators will spur further gains[para. 12].

Founded in 2016 by brothers Chen Tianshi and Chen Yunji, Cambricon started with backing from both state and private capital, eventually supplying AI chips for Huawei’s smartphones. U.S. sanctions on Huawei in 2019 devastated Cambricon’s revenue, which plummeted by nearly 80%, prompting a pivot to government contracts and a STAR Market IPO in 2020[para. 14][para. 15][para. 16][para. 17][para. 18]. The real turning point arrived with stricter U.S. export controls in late 2022, which—despite adding Cambricon to the U.S. Entity List—paradoxically fueled local demand. Production shifts to SMIC and surging domestic demand allowed Cambricon’s output to rebound strongly[para. 19][para. 20][para. 21][para. 22][para. 23][para. 24].

In the first half of 2025, Cambricon’s revenue surged 43-fold to 2.88 billion yuan, with cloud products comprising most sales. Demand is driven by tech giants (Alibaba, Tencent, Baidu) and state telecoms racing to build local AI computing power. Still, despite preorders, delivery is limited by production capacity. Cambricon competes closely with Huawei, which commands a much larger share, but industry forecasts suggest Cambricon could ship up to 1 million units by 2028 and beyond[para. 25][para. 26][para. 27][para. 28][para. 29][para. 30][para. 31][para. 32].

Cambricon’s valuation dilemma stems from both its enormous growth and its extraordinary price-to-earnings ratio, which on August 28 soared to 5,117.75 (far above the industry’s average). While some bullish scenarios rationalize such levels based on potential market share from Nvidia’s retreat, others warn of an unsustainable bubble. Inclusion in key stock indices and speculative fund inflows have amplified the rally, while a recent private placement scaled back amid regulatory scrutiny[para. 33][para. 34][para. 35][para. 36][para. 37][para. 38][para. 39][para. 40][para. 41]. As more chip companies go public, Cambricon may lose its “scarcity premium,” yet for now remains a bellwether in China’s chip ambitions[para. 42][para. 43][para. 44].