Cambricon's Sudden Stock Surge: Bubble or Strategic Breakthrough?

Cambricon Technologies has become one of the most polarizing stocks in China’s AI sector, surging over 562% since September 2024 to briefly claim the title of the country’s most expensive stock [1]. This meteoric rise is fueled by a combination of geopolitical tailwinds, a dramatic financial turnaround, and the broader push for semiconductor self-reliance. Yet, the company’s valuation—trading at a P/E ratio of 596.96 as of August 2025 [4]—raises urgent questions about whether this reflects a sustainable strategic breakthrough or a speculative bubble.

The Catalysts for Growth

Cambricon’s first-half 2025 results were nothing short of extraordinary. Revenue surged 4,348% year-over-year to 2.88 billion yuan, while net profit jumped to 1.04 billion yuan, reversing a 533 million yuan loss in 2024 [4]. This transformation is driven by two key factors:

1. Geopolitical Dynamics: U.S. export restrictions on advanced chips like NVIDIA’s H20 have created a vacuum in China’s AI infrastructure. Cambricon’s Siyuan 590 chips, which achieve 80% of NVIDIA A100’s performance at 30% lower costs in some scenarios, have become a critical alternative [1].
2. State-Backed Demand: Collaborations with domestic AI leaders like DeepSeek, Alibaba’s Qwen, and Tencent’s Hunyuan have accelerated adoption [1]. The Chinese government’s “Made in China 2025” initiative further incentivizes the use of homegrown chips, creating a policy-driven tailwind [5].

The result is a market capitalization of 664.3 billion yuan as of August 2025, up 519% year-over-year [5]. This growth mirrors the broader AI chip market’s expansion, which is projected to reach $18.3 billion in 2025 [3].

Valuation Risks: A House of Cards?

Despite these positives, Cambricon’s valuation appears disconnected from fundamentals. A P/E ratio of 596.96 implies investors are paying 596 times earnings for each yuan of profit—a multiple far exceeding even high-growth tech stocks [4]. This is compounded by:

• Unproven Scalability: While Cambricon expects 2025 revenue to reach 5–7 billion yuan (up from 1.2 billion in 2024), its P/E ratio assumes annual profits of 1.4 billion yuan—a figure not yet demonstrated [3].
• Operational Bottlenecks: The company relies on domestic foundries like SMIC, which lack the 5nm manufacturing capabilities of TSMC, potentially limiting performance and scalability [1]. Its software ecosystem also lags behind NVIDIA’s CUDA, which could hinder long-term adoption [5].
• Client Concentration: A small number of major clients, including ByteDance and DeepSeek, account for a significant portion of revenue. Any slowdown in these partnerships could destabilize growth [2].

Analysts warn that Cambricon’s rally may reflect a speculative frenzy rather than rational valuation. One discounted cash flow model suggests the stock is overvalued by 47,000%, with an intrinsic value of just 2.82 yuan compared to its 1,587.91 yuan price [1].

Strategic Breakthrough or Bubble?

The answer lies in the interplay of short-term momentum and long-term fundamentals. On one hand, Cambricon’s success is a direct response to geopolitical pressures and China’s strategic push for self-reliance. Its Siyuan 690 chip, expected to rival NVIDIA’s H100, and partnerships with state-backed AI developers position it as a key player in the domestic ecosystem [1]. The broader AI chip market is also projected to grow at a 30.69% CAGR through 2030 [5], offering long-term tailwinds.

On the other hand, the valuation risks are stark. A P/B ratio of 95.3x [5] and a P/E ratio exceeding 300x [1] suggest investors are betting on a future where Cambricon dominates the AI chip market—a scenario that hinges on overcoming manufacturing, software, and geopolitical hurdles. Competitors like Huawei and Hygon are also advancing rapidly, with Huawei’s Pangu AI and Hygon’s next-gen chips threatening to erode Cambricon’s market share [2].

Conclusion: A High-Stakes Gamble

Cambricon’s stock surge reflects both the transformative potential of China’s AI infrastructure and the speculative fervor driving its market. While the company’s financial turnaround and strategic positioning are compelling, its valuation appears to price in a level of dominance and profitability that remains unproven. For investors, the key question is whether they are willing to bet on a future where Cambricon’s Siyuan chips become the backbone of China’s AI ecosystem—or whether they will be left holding a stock priced for perfection in a sector still defined by uncertainty.

**Source:[1] Cambricon and China's AI Chip Turning Point [https://hellochinatech.substack.com/p/cambricon-china-ai-chip-turning-point][2] China AI Chip Ambitions Clash With U.S. Export Rules in ... [https://www.ainvest.com/news/china-ai-chip-ambitions-clash-export-rules-nvidia-crosshairs-2508/][3] AI Chip Statistics 2025: Funding, Startups & Industry Giants [https://sqmagazine.co.uk/ai-chip-statistics/][4] Cambricon Technologies (SHSE:688256) PE Ratio (TTM) [https://www.gurufocus.com/term/pettm/SHSE:688256][5] AI Chips - China | Statista Market Forecast [https://www.statista.com/outlook/tmo/semiconductors/ai-chips/china]