Cambrian Soars Past Nvidia, Broadcom with 4x Surge

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On December 20, 2023, a remarkable surge occurred in the stock market, as Cambricon Technologies, listed under the code 688256.SH, lit up the financial landscape like a dazzling starThe company witnessed an impressive 6.28% increase in its stock price, closing at 675.95 yuan per shareThis performance undeniably placed it at the forefront of the A-share market, second only to the illustrious Kweichow Moutai, which boasts a staggering share price of 1522 yuanCambricon has also left Northern Huachuang (002371.SZ) trailing behind with its 414.2 yuan share price, asserting itself as the second most expensive stock in the A-share market and capturing the attention of many investors.

Recently, Cambricon has demonstrated a rapid upward trajectory, as investors have shown a remarkable willingness to buy into the stock despite the high prices

The company’s year-to-date performance has seen an astonishing increase of approximately 400%, significantly outpacing the growth rates of major industry players like Nvidia (NVDA.US) and Broadcom (AVGO.US), even as the domestic AI industry continues to catch up with its global counterparts.

It’s also noteworthy that Broadcom has reached new heights, with its market capitalization surpassing one trillion dollars, solidifying its position as a leader in the AI chip sectorThis is the result of continuous innovation and development in the ASIC (Application-Specific Integrated Circuit) chip space.

Currently, the mainstream AI chip market is categorized into three main types: general-purpose chips represented by GPUs (Graphics Processing Units), specialized chips characterized by ASICs, and semi-custom chips represented by FPGAs (Field-Programmable Gate Arrays). Nvidia stands as the leading provider of GPUs, while Broadcom takes a prominent position in the ASIC segment.

ASIC chips have gained popularity due to their “custom-built” nature, excelling in processing specific algorithms efficiently

Furthermore, they offer a strong cost-performance ratio and low power consumption, making them highly sought after by tech giantsCompanies such as Google, Meta, and Apple have recognized this trend and are jumping on the ASIC bandwagon.

Many institutions believe that as large-scale AI models become more widespread, the demand for computational power will increasingly shift from pre-training to inference, leading to a growing and diversifying requirement for customized chipsIn the coming years, the growth of ASICs might surpass that of GPUs, making them the next big favorite in the market.

As a pioneer in domestic AI chip design, Cambricon has consistently focused on the research and development of AI inference chips

The increasing attention on ASIC chips in the market correlates with the recent upward momentum of the company’s stock price.

Moreover, Cambricon's sustained rise to new highs may also be linked to the burgeoning demand observed in the domestic AI sector.

ByteDance's AI model, Doubao, has achieved a significant milestone, ranking as one of the top two globally in terms of active usersThis highlights the promising future for domestic AI developmentRecently, news broke that ByteDance has updated its Doubao suite, igniting renewed interest in AI computational hardwareReports indicate that ByteDance plans to increase its capital expenditure budget to nearly 160 billion yuan by 2025, mainly directed towards the procurement of AI computing resources and infrastructure

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This reflects a strong commitment to a large-scale deployment in the AI domain.

Market analysts expect that if ByteDance is investing heavily in AI, other internet behemoths will likely follow suitThis could open up vast opportunities in upstream infrastructure, particularly in the AI chip sectorAs the first AI chip listed on the Science and Technology Innovation Board, Cambricon stands at a crucial intersection of potential growth.

However, despite the promising outlook, reality poses a stark contrastMany investors have expressed concerns over Cambricon’s fundamentals, perceiving a disconnect between its market valuation and its financial performance.

In the first three quarters of the year, Cambricon reported a mere 185 million yuan in revenue, coupled with a net loss of 724 million yuan attributable to shareholders

The company has been in the red for several consecutive years, with net losses from 2019 to 2023 totaling 1.179 billion yuan, 435 million yuan, 825 million yuan, 1.256 billion yuan, and 848 million yuan, respectivelyCurrently, there appear to be no signs of profitability for 2024.

While Cambricon's performance is chillingly subpar, its valuation remains exceptionally high, with a price-to-book ratio of approximately 55 times, significantly exceeding the average valuation levels of the semiconductor industryFrom this perspective, the enthusiasm of institutions backing Cambricon seems more fervent than past gatherings around top beverages, pharmaceuticals, and new energy sectors.

Computational power has become the “entry ticket” for tech giants vying for dominance in AI, and Cambricon is positioned at the center of this trend