Nvidia's H200 Unlikely to Hurt Demand for Chinese Chips — Market Talk

Nvidia's new artificial-intelligence platform, open models and ecosystem should create demand for robotaxis and support global growth, Citi analysts write in a note. Citi forecasts the global robotaxi market will grow to $188.91 billion in 2034 from $4.43 billion in 2025. China's total addressable market for robotaxis will rise to $67.59 billion in 2035 compared with $39 million in 2025. Nvidia's initiatives will likely increase investors' confidence and directly benefit Pony AI and WeRide from a software angle. Automakers such as BYD, Geely Automobile, Great Wall Motor, SAIC and Xiaomi, as well as ride-hailing platform Didi, could also benefit from the robotaxi industry's growth. In terms of hardware, Chinese lidar sensor maker Hesai will benefit. (jiahui.huang@wsj.com; @ivy_jiahuihuang)

By Sherry Qin

Beijing's bid for AI supremacy has been hobbled by a reliance on imported semiconductors. To fix that, it is tapping home-grown startups as it looks for the DeepSeek of chip-making.

There is no shortage of promising candidates but most are unprofitable, and they will need to spend heavily to close the gap on foreign-made chips.

Chinese companies' access to advanced accelerators is a critical bottleneck, Macquarie analysts said. The U.S. holds 75% of the world's computational power, China has just 15%, they added, citing data from research institute Epoch AI.

A reform that loosens stock market listing rules could help local chipmakers catch up, giving them access to fresh funding.

"Capital markets serve as a critical lifeline" for China's tech startups, said Terence Ho, EY's Greater China IPO leader.

Regulators over the summer re-opened a pathway for unprofitable startups in strategic industries to list on Shanghai's Nasdaq-like Science and Technology Innovation Board, or STAR. The change is now starting to bear fruit.

Moore Threads, dubbed by some as China's answer to Nvidia, has been the first to go public via that route. Shares of the Beijing-based AI-chip maker surged 425% in its debut last week, putting its market value at roughly $55 billion.

MetaX, which along with Moore is in the club of "Little Dragons" seen as highly promising chip startups, will list soon as well.

Though both have recorded steep losses as they invest heavily in research and development, the relaxed rules mean that even firms with zero revenue can go public. All they need is an estimated market capitalization of at least $566.7 million and products with high growth potential.

It only took 88 days for Moore Threads to get the green light for IPO--one of the fastest-ever approvals in China.

"The rapid approval is a perfect example of the 'unconventional measures' mentioned in the [five-year] plan to overcome bottlenecks in core technologies," said Ho at EY.

The shift aligns with China's latest five-year plan, which has made tech self-reliance its top priority, analysts say. But policy support and more funding don't guarantee companies will turn profitable, nor that chip makers can close the gap with foreign counterparts, especially in a field that requires heavy capex.

Moore Threads, founded in 2020 by former Nvidia executive Zhang Jianzhong, warned on Friday that its revenue growth could slow, raising the risk that it will continue to post losses and miss its profitability target.

MetaX, established by ex-AMD employees, has also yet to turn a profit.

Still, just as investors poured billions into China's tech sector since the "DeepSeek moment" in January when the Hangzhou-based startup released a large-language model to rival OpenAI's ChatGPT, a similar influx could flow into chip companies as more go public.

EY's Ho thinks investors are well aware of the challenges the startups face and the market's focus has been shifting from short-term profitability to long-term value.

Moore Threads' blockbuster debut signals market confidence in China's tech self-sufficiency drive. Other stocks aligned with tech autonomy reflect that too.

Shares of AI chip maker Cambricon Technologies, which listed in 2020, and those of Hong Kong-listed SMIC, China's biggest chip foundry, have more than doubled so far this year.

Getting that self-reliance tag opens the doors to government and private-sector money, even if their financials remain unconvincing.

"Whether a company is profitable or not is not the most important factor we consider when we invest, " said Angela Cheng, chief macro strategist at CGS International, owned by Chinese sovereign fund China Investment Corp.

Write to Sherry Qin at sherry.qin@wsj.com

China's domestic AI chip supply could catch up to demand by 2028, Bernstein analysts say in a research note. China's advanced logic chip production capacity could start accelerating in 2026 and 2027, which could allow domestic AI chip sales to grow five-fold in the next three years, the analysts say. AI chip vendors like Cambricon and Hygon will likely be direct beneficiaries, as they have secured sufficient advanced logic capacity to fuel fast growth in the next few years, they say. Foundries like SMIC and Hua Hong could also benefit but their stocks will be mainly driven by market sentiment given their already high valuations, they add. (sherry.qin@wsj.com)

By Adam Clark

Chinese chip designer Moore Threads surged more than fivefold on its first day of trading Friday. But it still has a long way to go to rival U.S. semiconductor leader Nvidia.

Moore Threads rose 425% from its initial public offering price to close at 600.5 yuan ($84.92). It raised more than $1 billion in the IPO.

The company is one of multiple Chinese semiconductor designers hoping to take advantage of the gap left by Nvidia's current absence from China's artificial-intelligence chip market. Notably, Moore Threads was founded in 2020 by Zhang Jianzhong, formerly an executive at Nvidia.

That should give the company some credibility, but it has a long way to go before matching its founder's former employer. Moore Threads ended the day with a market capitalization of 282.3 billion yuan, equivalent to slightly under $40 billion, according to LSEG data. Nvidia is worth nearly $4.5 trillion.

Moore Threads has released four generations of graphics-processing units. However, the specifications of its S4000 AI chip are well behind those of Nvidia's older H100 chips. Nvidia's H100 was released in 2022 and has since been superseded by later generations of its Hopper chips and its new Blackwell AI semiconductors.

Moore Threads isn't only far behind Nvidia and other Western companies, it is still a small player in the Chinese domestic market compared with companies such as Huawei or Cambricon Technologies.

Nvidia CEO Jensen Huang has previously said China represents a $50 billion market for AI infrastructure, growing at 50% a year. He has lobbied hard for U.S. permission to sell chips to Chinese customers, arguing it is better to lock China's companies into dependence on American hardware. However, that has raised the ire of Beijing, which has discouraged its companies from buying Nvidia chips.

Write to Adam Clark at adam.clark@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

Moore Threads Technology Co., a leading Chinese artificial intelligence chipmaker, surged in its Shanghai trading debut after raising 8 billion yuan ($1.13 billion) in the year’s second-largest onshore IPO.

The firm’s stock soared as much as 502% after being sold at 114.28 yuan a piece during the initial public offering. If gains hold, the debut would mark the biggest first-day pop for an IPO over $1 billion since China’s 2019 IPO reforms, according to data compiled by Bloomberg.

The listing comes as optimism over China’s drive for tech self-sufficiency intensifies, fueled by trade tensions and fears of US technology curbs. Moore Threads’ share frenzy stands out in an otherwise sluggish market, signaling strong investor appetite in specific sectors like this year’s AI winners.

Beijing-based Moore Threads is also among those benefiting from a market share void left by Nvidia Corp.’s forced exit. Earlier this year, regulators eased listing rules for unprofitable firms on the Nasdaq-style Star Board to bolster homegrown startups.

"A surge of this scale can be somewhat expected from the strong demand, and this is one of those flagship IPOs that will go on in history and be remembered," said Shao Qifeng, chief investment officer at Ying An Asset Management Co. "However, from experience, such memorable IPOs don’t always bode well for their respective sectors as could be an indication of froth, at least in some corners."

Proceeds from the IPO will fund next-generation projects in AI and graphics chips as well as supplement working capital. The offering ranks behind Huadian New Energy Group Co.’s $2.7 billion IPO in July. Investor interest in the offering was strong, with the retail portion oversubscribed 2,750 times even after a clawback, making it the second most sought-after onshore IPO over $1 billion since 2022, Bloomberg data shows.

Friday’s gains spurred a rotation out of related stocks, with Shenzhen H&T Intelligent Control Co., which holds a minor stake in Moore, falling as much as 10%.

During the first three quarters of the year, Moore Threads’ net loss was 724 million yuan, according to a Sinolink Securities note, narrowing by 19% from the year ago period. Meanwhile, revenue surged by 182% to 780 million yuan.

Still, its valuations remain lofty. Moore Threads’ price to sales ratio at 123 times the offer price of 114.28 yuan per share is higher than the average of 111 times for peers, according to a Dec. 4 filing. The company recently asked its lead sponsor to remind investors of risks related to its valuations.

Origins

Founded in 2020 by former Nvidia executive Zhang Jianzhong, Moore Threads had started out earning revenue from graphics chips for gaming and visual rendering before pivoting to AI accelerators used in powering large language models.

A major setback came in October 2023 when the US Commerce Department added the firm to its entity list, barring access to key technologies, a move that resulted in job cuts and restructuring.

Despite the setback, investor optimism has only picked up as Beijing promoted the sector as a key part of its push into technology supremacy. The Star 50 Index, which tracks the biggest companies on the Star Board, has jumped more than 30% this year, with shares of chip designer Cambricon Technologies Corp. doubling.

A successful listing could pave the way for others. MetaX Integrated Circuits Shanghai Co., a closely watched peer, opens subscriptions Friday. Meanwhile, memory chipmakers Yangtze Memory Technologies Co. and ChangXin Memory Technologies Inc. are weighing onshore IPOs that could value each at up to 300 billion yuan.

Recent listings have performed well because market sentiment has been muted, “so it makes sense for a sizable jump at its debut,” said Chen Zunde, a fund manager at Guangdong Fund Investment Co. Still, some worry the IPO could siphon funds from peers, adding pressure to the market, he added.

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Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

Cambricon Technologies Corp plans to more than triple its production of AI chips in 2026, aiming to wrest market share from Huawei Technologies Co. in China and fill a void left by Nvidia Corp.’s forced exit. The Beijing-based company is preparing to deliver half a million artificial intelligence accelerators in 2026, people familiar with the matter said.

That includes as many as 300,000 units of its most advanced Siyuan 590 and 690 chips, the people said, asking to remain anonymous discussing private targets. The company will rely primarily on Semiconductor Manufacturing International Corp.’s latest production process, known as “N+2” 7-nanometer, the people said.

The ramp-up at Cambricon underscores the rapid ascent of Chinese chipmakers after Beijing began actively discouraging the use of Nvidia’s product this year, part of a longer-term effort to wean the country off US technology. Huawei is also preparing to double the output of its most advanced artificial intelligence chips over the next year. And up-and-comer Moore Threads Technology Co. debuts Friday in Shanghai, showcasing its own ambitions to carve out a slice of the market.

Cambricon’s shares rose 2.8% in Shanghai, extending its gains just before the market closed Thursday. SMIC’s stock rose 3.9% in Hong Kong, while rival Hua Hong Semiconductor Ltd. climbed 3.1%.

Nvidia boss Jensen Huang said in November that his company is effectively blocked from China, which would spur the rise of more domestic competition from the likes of Huawei. And while the Trump administration is considering a plan to allow the sale of its H200 cards, there’s no guarantee Beijing won’t also hinder its adoption.

Few companies have benefited as visibly from that situation as Cambricon, which reported a 14-fold surge in its revenue in the September quarter — and a nine-fold leap in market value since 2021. It’s now on track to win new orders from some of China’s biggest AI spenders, including Alibaba Group Holding Ltd. in the coming years, the people said. The chip designer already counts ByteDance Ltd. as a primary customer, which accounts for more than 50% of all Cambricon’s orders right now, the people said.

Alibaba, ByteDance, Cambricon and SMIC representatives did not respond to emailed requests for comment.

Whether Cambricon will hit those targets depends in large part on not just the pace of AI development, but also its ability to secure capacity at SMIC — at a time Huawei and other rivals are also vying to place orders with China’s most advanced chipmaker.

For context, Cambricon will build just 142,000 AI chips this year, Goldman Sachs estimates. SMIC’s own technology may prove an obstacle. When it comes to Cambricon’s top-of-the-line 590 and 690 chips, the company is, for now, managing yields of just 20%, the people said.

That means about 4 out of 5 silicon dies — the basic components of a full chipset — are considered flawed and unusable. The top global contract chipmaker, Taiwan Semiconductor Manufacturing Co., now has an estimated yield of at least 60% with its latest 2-nanometer process, which is three generations or seven years ahead of SMIC’s technology, according to some analysts.

Another potential bottleneck is the supply of the high-bandwidth memory chips required to make AI accelerators. That technology remains a challenge for Chinese companies, which is why Huawei’s latest 910C AI accelerators still rely on memory chips from SK Hynix Inc. and Samsung Electronics Co.