Shares of "China's Nvidia" plummet after risk warning

Quotes of China's Cambricon Technologies, which promotes its chips as an alternative to Nvidia, collapsed after the company warned market participants about the risks of a record rise in the value of its shares. Euphoria among investors led to Cambricon's valuation being 12 times higher than the main beneficiary of the AI boom.

Shares of Cambricon Technologies fell by 9% at the opening of trading on the Shanghai Stock Exchange on August 29. The collapse of quotations of the AI-chip developer, which was dubbed the new "Nvidia" by stock exchange publications, became the strongest since April, while the rest of the market traded in the morning virtually unchanged, Bloomberg reports. The sell-off was triggered by Cambricon's statement, in which the company denied rumors about products allegedly in development, reminded investors about working under U.S. sanctions and stressed the difficulty of moving up the technology ladder.

"The increase in the company's share price has outperformed most of its peers and significantly outperformed the performance of the relevant indices. There is a risk that the share price may have deviated from the company's current fundamentals and trading investors may face significant risks," Cambricon cautioned.

Even after the collapse, Cambricon shares are worth twice as much as they were a month ago. Over the past year, their price has soared more than six times. According to GuruFocus, the Chinese company's shares are now trading at 481 times forward P/E (Forward P/E). Nvidia has a similar ratio of "only" 41. The exorbitant valuation has made Cambricon the most expensive publicly traded AI chip developer in China.

Much of the recent increase in Cambricon's stock price is due to the announcement by one of China's most promising AI startups, DeepSeek, that its new neural network is fully compatible with local chips, according to financial portal Invezz. The rise in Cambricon's share price was also partly a consequence of Washington's restrictions on the supply of U.S. AI chips to China, which stimulated demand for domestic solutions, the publication added.

More broadly, Cambricon's growth reflects an important shift in stock market structure in mainland China, Bloomberg emphasizes. Retail investors, predominant on the mainland, are moving away from consumer companies and betting on the technology sector as a tool to revitalize an economy mired in deflation and trade conflicts.

Earlier this week, Cambricon reported revenue growth of more than 4,000% in the first half of 2025. Despite the impressive growth, Cambricon is still a relatively small player: it will ship about 143,000 AI chips this year, Barron's reported, citing a Goldman Sachs forecast. Nvidia sold about a million of its AI chips in China in 2024, while local Huawei sold about 640,000.

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