CXMT shares soared 466% on the first day after its IPO. An analyst expects the price to double again.

Chinese chipmaker CXMT’s debut on the Shanghai Stock Exchange on Monday saw its shares surge more than fivefold. The largest initial public offering in Asia this year propelled the chipmaker to the top spot in terms of market capitalization among mainland Chinese companies—despite the recent sell-off in the global technology sector, Reuters notes. Analysts, however, are divided in their assessment of the company’s future stock performance: one predicted a 1,239% rise from the IPO price, while another immediately sold all of his shares.

At the close of trading on Monday, July 27, CXMT shares soared 466% from their IPO price of 8.66 yuan ($1.28). At its peak during the day, the gain reached 535%. The surge pushed CXMT’s market capitalization to 3.7 trillion yuan ($547 billion), compared with a valuation of $85.5 billion during its IPO preparations. As a result, CXMT briefly became the most valuable publicly traded company in China, even eclipsing Hong Kong-listed Tencent, the Financial Times notes.

The FT notes that the frenzy among investors is driven by high demand for AI memory chips. CXMT’s rise demonstrates Beijing’s success in building its own AI supply chain, shielded from U.S. export restrictions on key technologies, the publication explains. An additional factor driving the rise in the stock price was the small number of shares in free float: at the time of listing, it amounted to just 6.73%, as the bulk of the shares are subject to temporary restrictions on sale, Reuters noted.

During its IPO, the company issued 6.688 billion shares and raised 57.9 billion yuan ($8.5 billion)—the largest offering in mainland China (excluding Hong Kong) since the Agricultural Bank of China went public in 2010, according to the FT. If the option to issue an additional 1 billion shares is exercised, the total amount raised will approach $10 billion.

CXMT ranks fourth among the world’s largest manufacturers of DRAM, trailing only South Korea’s SK Hynix and Samsung Electronics, as well as the U.S.-based Micron, according to the FT. The company’s chips are used in a wide range of devices—from servers to video cameras. The Chinese chipmaker will use the capital raised to expand its production capacity and fund research into DRAM architecture.

This year, CXMT turned a profit, earning 33 billion yuan ($4.9 billion) in the first quarter alone. This marked an impressive turnaround from the 37 billion yuan ($5.46 billion) in cumulative losses it had incurred over the past decade, the FT noted.

The company has become one of the main beneficiaries of the AI boom, which has triggered a shortage and a sharp rise in prices on the global market, the newspaper notes. At the same time, CXMT’s current profits are still driven by sales of simpler chips for consumer electronics. At the same time, CXMT is conducting its own research and development of HBM—the most high-tech and expensive memory for AI data centers. However, the company is lagging behind global leaders due to U.S. export restrictions, the FT adds.

Market participants’ enthusiasm at the start of trading exceeded experts’ expectations. “We knew this would be a major IPO,” said Tilly Zhang, an analyst covering technology and industrial policy at Gavekal Dragonomics (as quoted by the FT). “And yet, the enthusiasm among investors is surprising.”

Investment bank Nomura Holdings has issued a “bullish” outlook on the company’s shares, predicting a 1,239% increase from the initial public offering price—or a 137% rise from the closing price on the first day of trading, according to Bloomberg. Nomura analyst Donnie Tan assigned the stock a “Buy” rating with a price target of 116 yuan ($17.13).

“We expect CXMT’s market share to grow at an accelerated pace, given that the global memory supply shortage is unlikely to ease in the coming years. High demand from autonomous AI systems will lead to a more than sevenfold increase in global memory consumption by 2030,” Tan says. According to his estimates, CXMT chip production volumes will grow by 40–45% annually through 2030. This will enable the Chinese chipmaker to increase its share of the global DRAM market from the current 10% to 18% by the end of 2028.

However, not all investors and analysts share this optimism. The rapid surge in the stock price, which has pushed CXMT’s market capitalization to nearly half that of its U.S. competitor Micron, has raised serious concerns among some market participants that the stock is overheated, according to Reuters.

“At that price, I wouldn’t risk holding or buying these shares,” said Wu Zhou, a fund manager at Shenzhen Deyuan Investment (as quoted by Reuters). The expert added that he had fully locked in his profits and sold the shares he received through the IPO immediately after the market opened.

Morningstar takes an even tougher stance: Analyst Jing Jie Yu estimates CXMT’s fair value at just 14.9 yuan ($2.2)—which is significantly lower than both Nomura’s target price and current market prices. According to the expert, without access to EUV lithography equipment, further advancement of DRAM technologies will be an extremely difficult task for the company.

“CXMT’s multiples remain significantly lower than those of key global manufacturers due to its technological lag, which forces it to sell DRAM at a discount to competitors,” Yu emphasized (as quoted by Bloomberg). “We do not expect this discount or valuation gap to narrow until CXMT overcomes its EUV limitations while maintaining economic viability.”

This article was AI-translated and verified by a human editor