The ranking of A-share gains in 2024 has finally been settled, and Cambrian has the last laugh. As of the close of trading on December 31, Cambrian won the title of "King of Stocks" with a 387% increase, with a total market value of nearly 280 billion. Founder Chen Tianshi’s net worth soared and he became the richest man in Jiangxi. But Cambrian's performance has been lackluster. From 2017 to the first half of 2024, Cambrian has incurred a cumulative loss of approximately 5.5 billion yuan. The latest financial report shows that its net loss in the first three quarters of 2024 was 724 million yuan, and its net loss after non-compliance deductions was 862 million yuan. Among them, the net loss in the third quarter was 194 million yuan, and the net loss after deducting non-profit items was 254 million yuan.
It is worth noting that Cambrian’s research and development expenses have dropped again and again since 2023, and the capital investment in fixed increases is a drop in the bucket for research and development. Analysts believe that “if Cambrian cannot sustain investment in basic research for at least ten years, it may be difficult to escape the fate of a ‘wealth-making machine’”.
Beautiful stock price, ugly performance
Cambrian's stock price has gone on a beautiful arc this year. Since late September 2024, Cambrian's stock price has skyrocketed. Starting from 220.01 yuan on September 25, it once reached a high of 700 yuan on December 23, becoming the second most expensive A-share stock after Kweichow Moutai.
As Cambrian's stock price rises, the value of the company's actual controller Chen Tianshi has also increased. Currently, the market value of the company's shares he holds has exceeded 80 billion yuan. As previously reported, Hurun Research Institute released the 2024 Hurun Rich List. Chen Tianshi, from Nanchang, Jiangxi Province, saw his wealth increase by 73% compared with last year, and his ranking rose 150 places, becoming the richest man in Nanchang.
However, from 2017 to the first half of 2024, Cambrian has incurred a cumulative loss of approximately 5.5 billion yuan. Taking advantage of the popularity of AI, why is the stock price of Cambrian, which is losing money, hitting new highs in succession?
"Cambrian is targeting Nvidia. Nvidia is a phantom that A-share investors cannot see or touch. Then the sky is its upper limit." Some analysts believe that the market's pursuit of Cambrian may also reflect our expectations for chips and add emotional support.
As the market leader, NVIDIA has a market capitalization of nearly US$3.5 trillion, accounting for 90% of the global AI chip market. Some people think that if Cambrian really becomes China's "Nvidia", then "Cambrian is not too expensive now, but too cheap."
As of the end of the third quarter of 2024, Cambrian's net assets are 5.3 billion yuan, and the price-to-book ratio has reached 34 times; if calculated based on the price-to-sales ratio, Cambrian has exceeded 200 times, which is much higher than Nvidia.
Can Cambrian become the second Nvidia? Founder Chen Tianshi made a bold promise in 2018 that the company would occupy 30% of China's high-performance artificial intelligence chip market within three years and implant its chips in 1 billion devices around the world. Six years have passed and this young man, who was born in 1985, has become the richest man in Nanchang. How many of the bold promises he made back then have been realized?
As a chip company, basic research and R&D investment are important indicators of strength and potential. What is worrying is that Cambrian’s R&D expenses have dropped again and again amid financial pressure.
In 2023, Cambrian's R&D expenses will be 1.118 billion, a year-on-year decrease of more than 26%, the first annual decrease since its establishment. In the first half of 2024, the company's R&D expenses will decrease by 7.27% year-on-year. Judging from the third quarter report data, its R&D investment fell by 9.91% year-on-year, while R&D investment in the first three quarters also dropped by 8.13% year-on-year. The proportion of R&D investment in revenue in the third quarter and the first three quarters also decreased significantly.
In 2020, Cambrian went public and raised only 2.582 billion yuan, less than one-twentieth of SMIC, which was listed in the same period. In 2022, Cambrian proposed a fixed increase plan of 2.65 billion yuan, but it was cut again and again under regulatory doubts, and in the end only 1.67 billion was raised. In mid-2024, Cambrian has only 1.383 billion in cash on its books, a drop of more than 65% from the end of 2023.
The funds raised last time were mainly used for Cambrian advanced process platform chip projects, stable process platform chip projects, general intelligent processor technology research and development projects for emerging application scenarios, and to supplement working capital.
Some analysts said that the main purpose of Cambrian's private placement is to improve the integration, computing power and bandwidth of its chips to improve its competitiveness. However, such R&D investment in the chip field is only a drop in the bucket.
Capital pursuit is a double-edged sword
Regarding the future of Cambrian's benchmark against Nvidia, some people have raised two questions: Can the product catch up with Nvidia? Can the funds last until the day it becomes "China's Nvidia"?
Previously, Nvidia’s high-end product A100 was restricted from export. Cambrian launched "Siyuan" in 2021, with inference computing power equivalent to 40% of A100, and training performance about 20% of A100. This product has been supplied in batches to server vendors such as Alibaba Cloud, Inspur, and Sugon, as well as AI algorithm companies such as iFlytek.
In 2023, Cambrian launched a new generation of Siyuan 590 chip, which is directly benchmarked against the A100 in terms of performance. According to Baidu’s internal test results, Siyuan 590 supports most mainstream models. The performance of different models varies. Some model training performance is very close to A100, while others only reach about 50% of A100. The overall performance can roughly reach 80% of A100.
Cambrian's MLU370 and MLU220 chips have been widely used in multiple industries and adopted by many leading domestic companies, with cumulative shipments exceeding one million pieces. MLU370 is a smart chip integrating inference and training for the cloud, while MLU220 is used in edge computing devices and smart terminals.
Some analysts said that there is still a gap in performance between these products and international leading products. How to narrow this gap or even catch up is not easy. “Due to the gap between it and the leading level in terms of high-end technology and product diversity, and its low fit with the needs of the private market, its business development faces challenges and it is difficult to achieve large-scale market expansion.”
The financial report shows that the government subsidies included in Cambrian in the first three quarters of 2024 are 105 million yuan, of which the government subsidies included in the third quarter are 52.54 million yuan.
It is worth noting that in Cambrian's third quarterly report, advances and inventories have increased significantly year-on-year. At the same time, the cash flow expenditures for purchasing goods in the cash flow statement have increased exponentially. The market is divided on these changes. Industry insiders believe that this may trigger market speculation about its chip manufacturing breakthrough, leading to upward revisions of fund expectations for its market value.
The fanatical pursuit of capital is undoubtedly a double-edged sword for a company in a critical growth period. After all, Nvidia has higher revenue and net profit, but Cambrian relies entirely on "imagination" at this stage.
The above-mentioned person believes that "if Cambrian can achieve a breakthrough in basic research, invest at least 5 billion yuan in basic research every year, and achieve high investment for 10 consecutive years, the originality and technology of its products will be possible to achieve the use of 1 billion devices around the world as mentioned by Chen Tianshi."
“If it cannot sustain investment in basic research for at least ten years, Cambrian may not be able to escape the fate of being a ‘wealth-making machine’,” the person said.
Text | Sina Technology Liu Lili