On the evening of September 5, Chinese AI chip maker Cambricon issued a statement via its “Cambricon Technology” WeChat account, warning investors about the presence of imposters posing as company experts at investor engagement events. The company reported that these individuals disseminated false information, resulting in significant negative repercussions for Cambricon.
Following this announcement, the company’s stock plunged by 13.48%, wiping out approximately 13.46 billion yuan ($1.85 billion) in market value in a single trading day.
Cambricon, known as the first AI chip company listed on China’s Science and Technology Innovation Board, went public on July 20, 2020, after a notably swift approval process of just four months. However, over the past four years, the company has struggled with ongoing financial losses. In the first half of this year, Cambricon continued to experience a decline in revenue and a net profit loss, accumulating a total net loss of 5 billion yuan since 2020.
No projected timeline for achieving profitability has been provided by the company. In their financial report, Cambricon attributed the continued losses primarily to significant investment in research and development aimed at maintaining technological leadership in a competitive market.
The company’s founder, Chen Tianqi, a former researcher and doctoral advisor at the Chinese Academy of Sciences, saw his wealth soar into the hundreds of millions when Cambricon was listed. However, the firm faces ongoing complications, especially after being placed on the U.S. Department of Commerce’s Entity List for export restrictions, which has disrupted its supply chain.
On the same day as the stock drop, there were reports that rumors about a delay in bidding for cloud computing contracts by a telecom operator led to institutional selling pressure. Analysts noted that such bidding delays could negatively impact Cambricon’s future orders and revenue expectations, diminishing investor confidence.
When media sources inquired about the stock’s unusual activity, Cambricon’s investor relations team assured that the company was operating normally and would disclose any significant matters through official announcements. They noted that they could not confirm the origins of the circulating rumors and emphasized that any information should align with the company’s public disclosures.
Following the incident, Cambricon reiterated their commitment to taking legal action against individuals posing as company representatives. They also stressed that their internal policies strictly prohibit employees from participating in external interviews or investor interactions.
Founded in 2016 and headquartered in Beijing, Cambricon made headlines after its 2020 IPO, but the company’s stock struggles resumed shortly thereafter, prompting some to joke that it peaked at listing. Following a rebound in 2023, driven by developments in the AI sector, the company’s stock price surged back to previous highs of around 200 yuan.
However, the surge was coupled with significant sell-offs from shareholders. In June 2022, two major shareholders, Nanjing and Hubei Zhaoyin, divested 4.65 million shares, translating to over 5 billion yuan in proceeds. This trend continued with other stakeholders, leading to a steep decline in stock value by November 2023.
Despite ongoing challenges, Cambricon’s stock rebounded significantly, closing on September 6 with a nearly 60% increase year-to-date, valuing the company at 89.8 billion yuan.
Chen Tianqi, along with his brother Chen Yunji, founded the company after establishing a reputation in the field of chip design, partially due to their partnership with Huawei. While early collaborations led to a surge in revenue, competition with Huawei’s in-house chip development strained their relationship.
Since its IPO, Cambricon has reported consistent financial losses. Data shows a steady decline in revenue and significant annual losses for several consecutive years. The company claimed the unfavorable impacts of being placed on the U.S. Entity List have posed significant challenges to its operations and financial health.
In response to these ongoing issues, Cambricon has committed to substantial investment in research and development, accounting for over 690% of its revenue in recent disclosures. As the company navigates these turbulent waters, the question remains: can Cambricon convert its technical investments into sustainable profitability in an increasingly competitive market?