Assessing the Bubble Risks in China's AI Chip Sector: The Moore Threads Case Study

The meteoric rise of Moore Threads, the Chinese AI chipmaker dubbed "China's Nvidia," has ignited a debate about the rationality of valuations in the country's semiconductor sector. Following its December 2025 IPO on the Shanghai STAR Market, the company's stock surged by as much as 723% in some reports, though more consistent accounts cite a 425–468% increase on its first trading day. This performance, coupled with a post-IPO valuation of 123 times 2024 sales-well above the industry average-raises critical questions about whether the frenzy reflects sound investment logic or speculative excess.

Valuation Metrics: A Tale of Two Narratives

Moore Threads' IPO priced at 114.28 yuan per share, raising 8 billion yuan in a retail offering oversubscribed 2,750 times. By the close of its debut, the stock had climbed to 584.98 yuan, a 425.46% gain, valuing the company at 282.3 billion yuan. This valuation, however, is anchored to a business that remains unprofitable. The company reported a net loss of 724 million yuan in the first three quarters of 2025, despite a 182% revenue surge to 780 million yuan during the same period.

The 123x sales multiple applied to Moore Threads dwarfs the average for its peers. For context, the broader AI chip sector in Q4 2025 exhibited divergent valuation multiples, with infrastructure providers trading at 30–50x revenue, while applied sectors normalized closer to 3–12x. Even within China's domestic semiconductor landscape, Cambricon, a direct competitor, trades at a 571.4 billion yuan market cap but with a lower revenue multiple. This discrepancy suggests that Moore Threads' valuation is driven less by current financials and more by speculative bets on its potential to disrupt the global AI chip market.

Market Sentiment: Policy-Driven Optimism or Irrational Exuberance?

The IPO's success is inextricably tied to geopolitical dynamics. U.S. export restrictions on advanced chips have intensified Beijing's push for technological self-sufficiency, creating a tailwind for domestic players like Moore Threads. As one analyst noted, "The company is not just selling GPUs" "it's selling the narrative of replacing Western dominance in AI infrastructure."

Yet this policy-driven optimism has bred volatility. While the stock initially surged past 650 yuan (a 468.78% increase), it later corrected sharply, dropping 13% in subsequent sessions. Moore Threads itself issued a cautionary note, warning investors that the rapid price rise "may indicate market overheating and irrational speculation" with no material changes in fundamentals to justify the gains. This volatility underscores the fragility of a market where sentiment is as much a driver as supply-demand fundamentals.

The Bigger Picture: A Sector on a Tectonic Plate

China's AI chip sector is projected to reach $8.17 billion in 2025 and $31.16 billion by 2030. Government initiatives like "Made in China 2025" and state-backed funding ($15.7 billion in 2024) have accelerated R&D in edge AI and GPU design. Companies like Huawei (with its Ascend 910C chip) and Cambricon are also gaining traction, with the latter planning to triple AI chip production in 2026.

However, the sector's growth is not without risks. U.S. export controls continue to limit access to advanced manufacturing tools, and while domestic foundries like SMIC are making strides, they still lag behind TSMC in cutting-edge node production. For Moore Threads, the challenge lies in translating its current hype into sustainable revenue and profitability. The company aims to reach 1.5 billion yuan in sales by 2025-a 242% increase from 2024-but achieving profitability by 2027 will require scaling production and securing major clients in data centers and AI cloud providers.

Conclusion: Bubble or Breakthrough?

Moore Threads' IPO is a microcosm of the broader tensions in China's tech sector. On one hand, the company's valuation reflects a rational acknowledgment of its strategic role in reducing reliance on foreign semiconductors. On the other, the disconnect between its current financials and sky-high multiples suggests a market driven more by fear of missing out (FOMO) than by rigorous analysis.

For investors, the key question is whether Moore Threads-and by extension, the AI chip sector-can deliver on its promise. If the company can scale its technology, secure commercial contracts, and navigate the geopolitical landscape, its valuation may prove justified. But if it falters, the correction could be severe, given the speculative nature of the current rally.

In the end, the Moore Threads story is not just about a single IPO-it's a test of whether China's push for tech self-sufficiency can overcome the inherent risks of policy-driven investing. For now, the jury is out.