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Cambrian's Market Value Exceeds 300 Billion

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In recent times, the technology startup known as Cambrian has made headlines with a remarkable surge in its market valuation, which has surpassed 300 billion Chinese YuanThis astronomical rise has raised eyebrows and led to a debate on whether this remarkable valuation is grounded in tangible value or if it represents a speculative bubble.

Over the past year, Cambrian has experienced astronomical growth on the capital market, witnessing a fivefold increase in its share price from 118.45 Yuan on January 10, 2024, to a peak of 777.77 YuanSuch growth propelled its market capitalization past 310 billion Yuan, making it one of the most talked-about stocks in the A-share marketHowever, amidst this hype, the company’s revenues paint a starkly different pictureCambrian reported revenues of only 185 million Yuan, and it recorded losses of 724 million Yuan in the first three quarters of 2024 alone

Cumulatively, between 2017 and the third quarter of last year, the company posted losses totaling 5.6 billion Yuan.

What, then, has driven Cambrian’s popularity in the capital market despite its dismal financial performance?

From a market benchmarking perspective, Cambrian’s rise can be attributed in large part to the impressive performance of its global counterpart, NvidiaNvidia has become a giant in the technology sector and a dominant player in the burgeoning generative AI eraAs of now, Nvidia boasts a staggering market valuation of 3.33 trillion U.Sdollars, approximately equivalent to 24.4 trillion YuanThe company has consistently soared, with Q3 revenues reaching 35 billion U.Sdollars, an astonishing 94% increase from the previous yearIf this trend continues, Nvidia’s annual revenue could hit 140 billion U.S

dollars, alongside a net profit of 19.3 billion U.Sdollars, positioning it as one of the most profitable technology companies in the worldCambrian is often perceived as China’s version of Nvidia due to its foray into AI chipsThis identification has served as a primary driver for Cambrian's stock price rally, fueling the speculation that led to its inflated valuationNevertheless, one cannot ignore the fundamental differences between the two companiesWhile Nvidia’s revenue is soaring, Cambrian's revenue stands at a meager 185 million Yuan, and it remains entrenched in continual losses with significant uncertainty surrounding its path to profitability in the coming yearsThis disparity raises serious questions about the rationality of the market's valuation of Cambrian.

Furthermore, where Nvidia focuses on GPUs (Graphics Processing Units), Cambrian specializes in ASICs (Application-Specific Integrated Circuits), a sector projected for substantial growth

In the age of generative AI, the true contest lies in how many Nvidia GPUs one can leverage to support powerful AI models.

In the realm of high-performance AI chips, Nvidia currently enjoys an almost monopolistic positionVarious stakeholders are increasingly seeking to minimize their dependence on Nvidia due to multiple factors, including monopolistic tendencies and supply shortagesAs a result, the demand for custom chips designed explicitly for particular AI tasks has surged, prompting technology giants to explore the avenue of tailored AI chips.

For example, Broadcom reported that its revenue from AI operations in fiscal 2024 reached 12.2 billion U.Sdollars, reflecting a remarkable 220% increase compared to the previous year, predominantly due to strong demand for custom AI chipsThe company’s CEO, Hock Tan, indicated that the custom AI chip sector could generate revenues between 60 billion and 90 billion U.S

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dollars by 2027. An observation of Broadcom’s custom AI chip program highlights that ASIC technology is also set to emerge as a promising growth avenue.

Despite Cambrian’s status as one of the hottest AI chip concept stocks, its meteoric rise mirrors investors’ optimistic outlook on the business prospects of AI fueled by generative technologyThe persistent advancements in large model technology have led to a significant uptick in computational power needs, thus greatly enhancing the demand for foundational chips capable of supporting these large modelsProjections show that the global market for AI chips is expected to balloon to 67.1 billion U.Sdollars by 2024 and further swell to 119.4 billion U.Sdollars by 2027. This vast market potential fuels investor confidence in companies like Cambrian.

Despite the palpable excitement over the AI sector and the exhilarating demand it entails, discussions surrounding whether the escalating capital market valuations are merely an inflated bubble have begun to surface

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