1. [para. 1][para. 2] China’s leading AI chipmakers, Hygon Information Technology and Cambricon Technologies, reported robust earnings growth in the first three quarters of 2026, yet their share prices plunged amid concerns over a bursting AI bubble. This divergence between strong financial performance and falling valuations reflects broader market anxiety about the return on investment in AI infrastructure, which has triggered a sell-off in technology stocks even as domestic demand for computing power surges.
2. [para. 3][para. 4] Both companies' shares have retreated more than 40% from their year-to-date highs reached around July. On Tuesday, Hygon closed down 5.5% at 187 yuan ($28), giving it a market capitalization of 434.7 billion yuan, while Cambricon fell 5.7% to 913 yuan, valuing it at 574.1 billion yuan. Both stocks rebounded in early trading on Wednesday as major indexes rallied. The valuation pullback also swept across other AI hardware providers, with optical module makers Zhongji Innolight and Eoptolink dropping 2.9% and 5.6%, respectively, and memory chip manufacturer Biwin Storage falling 3.7%.
3. [para. 5] A chart of third-quarter 2026 earnings illustrates the strong growth. Hygon posted quarterly revenue of approximately 5.9 billion yuan and net profit of roughly 1 billion yuan, marking year-on-year increases of 45.5% and 37.9%, respectively. For Cambricon, quarterly revenue reached about 3.5 billion yuan and net profit 1.4 billion yuan, with year-on-year growth of 104.5% and 147.7%.
4. [para. 6][para. 7] For the first nine months of 2026, Hygon’s revenue jumped 57.6% year-on-year to about 15 billion yuan, while net profit attributable to shareholders rose 45.1% to about 2.8 billion yuan. The company attributes this growth to the rapid development of the AI industry and a shift toward market-driven chip self-sufficiency, which continues to drive up demand for higher-end homegrown chips.
5. [para. 8][para. 9] Hygon has largely digested its backlog, with contract liabilities dropping to 12 million yuan at the end of September from 2 billion yuan at the start of the year. However, strategic stockpiling pushed inventory up 39% to 8.9 billion yuan, resulting in a net operating cash outflow of 2.4 billion yuan, compared with a net inflow of 2.3 billion yuan a year earlier. To boost market confidence, Chairman Li Jun proposed a share buyback of 500 million to 800 million yuan on Oct. 16 to fund employee stock ownership or equity incentive projects.
6. [para. 10][para. 12] Cambricon also reported stellar results, with revenue for the first nine months surging 106.8% year-on-year to about 9.5 billion yuan, and net profit reaching about 3.7 billion yuan, up 131.5%, surpassing its full-year profit of 2.1 billion yuan in 2025. The company stated in an October filing that it expects a stronger financial performance as market demand expands, and that the continuous improvement of algorithmic models will create new demand for highly efficient, large-model-oriented hardware to lower training and inference costs.
7. [para. 11] Cambricon’s improved sales collection turned its net operating cash flow positive at 228 million yuan. However, inventory skyrocketed 136% from the beginning of the year to 11.7 billion yuan, now accounting for more than half of the company’s total assets.
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