The recent surge in share prices of Cambricon Technology Co., Ltd. has sent ripples through the financial markets, as the stock climbed by a remarkable 20% on July 16, restoring its market capitalization to over 100 billion yuanBy July 19, it had surpassed 270 yuan with a market valuation exceeding 110 billion yuanThis impressive growth not only reflects investor sentiment but also underscores the rising expectations surrounding artificial intelligence (AI) in China.
According to IDC, a respected international consultancy, the Chinese computing center service market is expected to grow at a compound annual growth rate (CAGR) of 18.9% over the next five years, potentially reaching a staggering 307.5 billion yuan by 2027. Such forecasts bode well for companies positioned within the AI landscape, like Cambricon, which has solidified its status as a leading AI chip producer—a position that comes with its own set of challenges and uncertainties.
On July 18, in a move signaling confidence in its future, Cambricon's actual controller, chairman, and CEO, Chen Tianshi, proposed a share buyback worth between 20 million to 40 million yuanThis step aimed to boost market confidence but also highlights the challenges the company faces in ensuring sustained profitability amid fluctuating revenues.
Cambricon's journey is characterized by both dramatic highs and disheartening lowsThe company, founded in March 2016, traces its origins back to a small team created by the Chinese Academy of Sciences in 2008, focused on intersecting processor architecture with AIThis deep-rooted history and elite team—comprising many graduates from prestigious universities—has fueled its ambitions in the AI chip sector.
As a pioneer in the field, Cambricon entered the public trading space on July 20, 2020, on the Science and Technology Innovation Board, witnessing its stock rise to unprecedented levels; it peaked at 295 yuan per share on its opening day, sending its market cap above 100 billion yuan
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However, this initial exuberance was short-lived, and within a year, the stock price fell to around 100 yuan, hovering in the 50 to 70 yuan range during much of 2022, even sinking as low as 46 yuan.
The turning point for the company came in 2023, amidst the explosion of interest in AI, especially following the breakthrough success of ChatGPTCambricon's stock price rebounded to 271 yuan in April, pushing its market capitalization back to 100 billion yuanHowever, as the second half of 2023 approached, several venture capital stakeholders began significantly reducing their positions in the company, leading to another decline in stock prices.
Despite these market fluctuations, the operational reality for Cambricon paints a more sobering pictureSince 2021, the company has struggled to significantly increase revenue, stagnating at about 700 million yuan per yearThis stagnation is compounded by ongoing losses, with net profits consistently in the red, suggesting that commercialization efforts remain fraught with challenges.
In terms of its business model, Cambricon primarily operates as a Fabless semiconductor company, focusing on design and sales while outsourcing manufacturing and assemblyThe company has diversified its revenue streams, which include chip sales, acceleration cards, full training machines, intelligent computing clusters, intellectual property licensing, and software servicesHowever, dependence on high-profile clients has proven detrimental to consistent revenue generation.
A changing tide was noted in 2018 when Cambricon's dependence on Huawei's HiSilicon became increasingly apparentCambricon's revenue from IP licensing for AI processors had relied heavily on sales to Huawei, representing virtually the entirety of its revenue in those yearsHowever, as Huawei began producing its own AI chips, Cambricon saw a 41.23% decline in that revenue stream in 2019 as it lost its primary client to internal competition.
By 2020, the introduction of intelligent computing cluster systems began to replace the IP licensing revenue model as a primary income source
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