The rise of AI technology has sparked intense competition among companies, with several emerging as leaders in the field of artificial intelligence chip manufacturingOne significant player in this landscape is Cambrian, a company that has made substantial strides in recent monthsOn January 10, Cambrian's share price saw a remarkable increase of 7.4%, reaching 765 yuan per share, marking a historic peak with its market capitalization approaching 320 billion yuanAlthough this surge moderated later in the day, the company's stock ended the session with a respectable gain of 4.29%. Since October 2023, Cambrian's share price has exhibited considerable volatility, starting at 289.16 yuan per share on September 30 and climbing to 712.29 yuan on January 9, representing an impressive cumulative increase of nearly 200%. This growth is particularly noteworthy when compared to the low of approximately 103 yuan per share recorded last February, illustrating a nearly sixfold increase.

Cambrian specializes in the development of AI chips, with products spanning a wide range of applications, including cloud intelligent chips, acceleration cards, training machines, and edge computing products

Their chips are employed in cloud servers and data centers, and the business model encompasses aspects such as intellectual property licensing, software development, and intelligent computing cluster systemsAs revealed in company reports, they have mastered several key technologies for complex chip physical design using advanced manufacturing processes, including 7nm technologyThis expertise has led to the creation of various chips, such as the Siyuan 100 and Siyuan 370. It's noteworthy that a significant portion of Cambrian's revenue is derived from its intelligent computing cluster businessRecent disclosures have indicated partnerships with major players in AI modeling, such as Zhixiang Future and Baichuan Intelligence, facilitating the deployment of Cambrian's cloud intelligent acceleration cards by major telecommunications provider China Mobile.

In the realm of AI chips, Cambrian is often likened to global giants such as NVIDIA

• Tesla Finally Strikes Back
• What’s Next for the Dollar?
• NVIDIA Becomes a Trendsetter at CES
• Morning Brief FM | January 11, 2025
• Stocks Slide as Rate Hike Fears Ease

Their AI chips are similarly utilized in large-scale models, including those for natural language processing, video image generation, and recommendation systemsCurrently, Cambrian is working on a new generation of intelligent processors, focusing on optimizing their microarchitecture and instruction set for these advanced applicationsMoreover, the company's software training platform has adapted to include support for trending deep learning models like the Llama3 and Qwen series, keeping them competitive in an evolving landscape.

Ownership stakes within Cambrian reveal intriguing insights; the company's chairman, Chen Tian Shi, held a significant 28.63% of shares by the end of the third quarter of 2024. His wealth, estimated at around 32 billion yuan according to the 2024 Hurun Report, places him at an impressive 140th position, a dramatic rise of 150 slots from the previous yearAs Cambrian's stock value surged, the worth of Chen's holdings soared correspondingly, crossing 80 billion yuan based on the company's latest market valuation.

Market analysts project significant growth for the AI chip industry

Estimates from leading research institutions indicate that the global market for AI chips is expected to reach a staggering 90.2 billion dollars in 2024, a year-on-year increase of 33.8 billion dollarsAdditionally, the compound annual growth rate for this sector over the next five years is anticipated to reach 24.55%. The Chinese market alone has demonstrated explosive growth, with a compound annual growth rate of 79.9% over the past five years, projecting a total market size of 144.7 billion yuan by 2024. However, it is important to note that a significant 85% of the Chinese AI chip market is dominated by GPU chips, primarily manufactured by NVIDIA, while Cambrian focuses on non-GPU intelligent chips.

Despite this optimistic market landscape, Cambrian has faced challenges in achieving profitabilityWhile revenues have shown a notable increase—recording 121 million yuan in the third quarter of 2024, marking a robust year-on-year growth of 284.59%—the company has continued to operate at a loss

Over the first three quarters of 2024, Cambrian reported revenues of 185 million yuan, a growth of 27.09% compared to the previous yearHowever, net losses for this period amounted to 724 million yuan, although this was an improvement compared to losses in the same period in the prior year, reducing losses by approximately 83 million yuan.

In an environment where profitability remains elusive, Cambrian's investment in research and development has been significant, often surpassing their revenue figuresIn the first three quarters of the previous year alone, the company allocated 659 million yuan to R&D, which constituted a staggering 355.65% of their revenueInterestingly, Cambrian is responding to its economic landscape by decreasing R&D expendituresIn the same period, R&D spending was reduced by 8.13%, resulting in a notable drop in its revenue ratio by 136.36 percentage points

The company has commented that it is adjusting its strategic focus and has gradually halted some of its lower-margin R&D projects.

As of late last year, Cambrian's total asset value and liquidity faced some notable declinesBy the end of the third quarter, total assets reached 6.095 billion yuan, a drop from the same period in 2023, while liquid assets amounted to 5.257 billion yuan—down by 390 million yuan from the end of the previous yearMoreover, cash and cash equivalents stood at 958 million yuan, a reduction of 910 million yuan year-on-yearHowever, the company revealed an increase in advance payments, totaling 854 million yuan at the end of the third quarter, significantly higher compared to the end of 2023.

Reports from December affirmed that Cambrian's inventory had surged to 1.015 billion yuan at the end of the last quarter, dramatically higher than the roughly 100 million yuan recorded at the end of 2023. The increase in advance payments suggests that the company's chip production capacity may be becoming more abundant