Cambricon Stock Drops 21% Amid Cooling Tech Rally in China

Cambricon Technologies' shares have dropped 21% this week, erasing 80 million yuan from its market capitalization, amid a cooling market rally. The decline comes after the company warned of potential overvaluation, as the tech industry's recent rally shows signs of slowing down. Cambricon is China's answer to Nvidia and has been a key beneficiary of the tech-focused market surge.

Cambricon Technologies Corp. shares have dropped by 21% this week, erasing 80 million yuan from its market capitalization, amidst a cooling market rally. The decline comes on the heels of the company's warning about potential overvaluation, as the tech industry's recent rally shows signs of slowing down. Cambricon, often referred to as China's answer to Nvidia, has been a key beneficiary of the tech-focused market surge.

The selloff of Cambricon shares has been driven by several factors. The company's weighting on the SSE Science and Technology Innovation Board 50 or Star 50 Index is set to be lowered to 10% from around 15%, according to an exchange statement earlier this week. This reduction in weighting has contributed to investor concerns about fund flows [1].

Additionally, investors remain wary of the recent surge in Cambricon's stock price, which has more than doubled this year. The company's meteoric rise has attracted speculators, but the potential risks associated with such rapid growth have become a focal point for investors. Cambricon has warned investors about risks in trading its stock, further fueling the selloff [1].

Cambricon's customer concentration risk is another significant factor. The company's top five customers accounted for 94.6% of its sales in the first half of 2025, with one client alone representing 79.1% of sales. This high level of concentration exposes Cambricon to the risks associated with relying heavily on a few key customers [2].

Despite the recent decline, Cambricon remains a formidable player in the AI chip market. The company's revenue jumped by an astronomical 4,348% to $402 million in the first half of 2025, driven by its aggressive expansion and the growth of the AI market in China. Goldman Sachs has hiked its target for Cambricon shares for the second time within two weeks, reflecting the company's potential for continued growth [2].

However, the future of Cambricon is not without its challenges. The company is competing against industry giants like Huawei and Alibaba, both of which have virtually limitless pockets. Moreover, Cambricon is reportedly drawing nearly 80% of its revenue from ByteDance alone, which entails a chronic customer concentration risk [2].

In conclusion, Cambricon Technologies' shares have dropped significantly this week amidst market cooling and valuation concerns. While the company faces several challenges, its potential for growth in the AI chip market remains significant. Investors will continue to watch Cambricon closely as it navigates the complexities of the tech industry and the geopolitical landscape.

References:
[1] https://www.bloomberg.com/news/articles/2025-09-04/cambricon-shares-tumble-on-chip-rotation-weighting-changes
[2] https://wccftech.com/goldman-sachs-forced-to-chase-after-chinas-nvidia-cambricon-as-it-glows-red-hot/