Chinese AI Chip Giant's Shares Plunge After Warning of "Risk"

Shares of Cambricon Technologies, a leading Chinese artificial intelligence (AI) chipmaker, experienced a significant decline after the company issued a public warning to investors about trading risks. The move follows a month-long rally that saw its stock price more than double, propelling it to become the most valuable publicly traded company on the mainland.

On Thursday, Cambricon [SHA: 688256] saw its stock fall by more than 7%, closing down a total of 6% at CNY1,492.49. The selloff was triggered by the company's filing, which alerted investors to a potential disconnect between the stock's price and its fundamental value. The stock's price-to-earnings ratio is more than 5,000 times, a figure far exceeding the industry average. Since late July, the company's shares had surged by more than 140%, far outperforming the broader market. Goldman Sachs recently increased its 12-month price target for Cambricon, raising it by 50% to CNY1,835.

Despite the recent share price volatility, the company's financial performance shows signs of strong growth. The company also announced a massive jump in revenue—a 44-fold increase to CNY2.9 billion—driven by domestic demand for semiconductors. This growth is linked to a national push for technological self-reliance, with China's cabinet recently issuing new guidelines to advance its "AI Plus" initiative.

The company's positive financial outlook is tempered by its own projections. Cambricon forecasts its full-year revenue to be between CNY5 billion and CNY7 billion, a substantial increase from the CNY1.2 billion it reported last year. However, it cautioned investors that this is a preliminary estimate and does not represent a firm commitment. The company also reminded investors that it operates under U.S. sanctions and faces challenges in climbing the technology ladder. This is part of a broader trend where investors in China's heavily retail-dominated market are shifting away from consumer firms and betting on the technology sector to re-energize the economy.