China investors stay bullish on Cambricon despite index reshuffle
Cambricon Technologies, often dubbed China’s Nvidia, faces more than 8 billion yuan ($1.1 billion) in passive outflows due to a quarterly rebalancing of the STAR50 Index, but analysts say investor confidence in the AI chipmaker remains intact.
The company’s stock, which more than doubled in August, exceeded the 10% cap for individual weightings in the tech-heavy index. Though Cambricon shares fell 14% last week on profit-taking and rebalancing fears, they have since rebounded 10%, hovering near record highs.
Valuations are eye-watering—Cambricon trades at 521 times earnings, compared with Nvidia’s multiple of 50—but Beijing’s push for tech self-sufficiency, the DeepSeek AI breakthrough, and large-scale investments by Alibaba, Tencent, and Baidu continue to fuel the rally.
“Maybe some investors will use it as a reason to take profit, but I don’t think that will affect the long-term trend,” said Shihao Li, analyst at CLSA. Gavekal’s Tilly Zhang added that optimism is growing that China’s AI sector has entered a “self-sustaining cycle of rising investment and higher profitability.”
Cambricon’s fundamentals have helped power the surge. First-half revenue jumped to 2.9 billion yuan ($407 million) from just 64.8 million yuan a year earlier, swinging to a 1 billion yuan profit. The company forecasts 5–7 billion yuan in operating revenue for 2025.
Still, risks remain. Some fund managers warn of a speculative bubble, while others argue that growth potential tied to China’s strategic need to replace foreign AI chips may justify lofty valuations.
Broader Chinese markets are riding the same wave. The CSI AI Index is up 60% this year, far outpacing the 15% gain in the CSI300, and the Shanghai Composite has hit levels not seen in a decade.
The spotlight now shifts to whether Cambricon can sustain profitability and meet surging demand for AI chips—critical to maintaining its role as the flagship of China’s AI boom.