In the ever-evolving landscape of the stock market, few tales illustrate the volatility and emotional rollercoaster of investors quite like that of Cambrian Technologies, coded as 688256.SH on the Shanghai Stock ExchangeIn January 2024, shares fluctuated dramatically, leading investors to experience stark feelings of anxiety and uncertainty, often akin to a thrilling yet terrifying amusement park ride.

On January 17, the morning trading session saw Cambrian shares dip by 3.87%, reaching a low point of 571 yuan each, the lowest since December 17, 2024. By the end of the day, the shares had recovered slightly, closing at 592 yuan, reflecting a modest decline of 0.34%. This decline came on the heels of a previous day's astonishing near-17% plunge, suggesting that while the volatility continued, some investors were beginning to stabilize their expectations amidst the chaos.

The fluctuations in Cambrian’s stock price appeared to be heavily influenced by the company's financial forecast released on January 14, which projected an annual revenue between 1.07 billion and 1.2 billion yuan for 2024, a significant increase ranging from 50.83% to 69.16% year-over-year

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However, contrasting this growth was a prediction of a net loss of 396 million to 484 million yuan attributable to its parent company, indicating a narrowing of losses compared to previous yearsSuch mixed signals have led many investors to question the company’s trajectory and financial health.

From a numerical standpoint, the revenue for the first three quarters of 2024 stood at approximately 185 million yuan, with the company reporting a net loss of 724 million yuanAnalyzing the expectations for the fourth quarter, it appeared that Cambrian could generate between 885 million to 1.015 billion yuan in revenue, and witness a potential profit reversal with estimations of net income ranging from 240 million to 328 million yuanThis potential shift provides glimmers of hope, especially when compared to the previous year's figures, where the company recorded a revenue of 564 million yuan alongside a net loss of 40.71 million yuan.

In its analysis of performance, Cambrian noted a concerted effort to expand its market reach and enhance applications in artificial intelligence (AI), which has propelled its revenue growth compared to the same period last year

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However, inquiries made by reporters to the company's securities department regarding their financial performance and stock market behavior went unanswered, leaving room for speculation among analysts and investors alike.

Founded in 2016, Cambrian Technologies has positioned itself at the forefront of AI chip innovation and development, buoyed by its strategic listing on the STAR Market in July 2020. Dubbed the “first stock of AI chips on the STAR Market” and often compared to Nvidia in its home market, Cambrian's ambition to lead this burgeoning sector has been met with both enthusiasm and skepticism.

Despite the accolades and rising stock prices, Cambrian’s history has been complicated by persistent losses, with the total deficit from 2017 to mid-2024 hovering around 5.5 billion yuanThe latest financial report for the first three quarters of 2024 indicated losses amounting to 724 million yuan, with a more adjusted loss of 862 million yuan when accounting for non-recurring items

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Specifically, in the third quarter alone, net losses were recorded at 194 million yuan, and 254 million yuan when adjusting for non-recurring expenditures.

The disconnect between Cambrian’s performance and stock market valuation has not gone unnoticedZhang Chengyu, a partner at a consultative firm, remarked on the misalignment between the high expectations surrounding domestic chip manufacturers and their current realitiesWhile there is rapid procurement demand from major players like ByteDance and Alibaba, the majority of domestic enterprises are still in the infancy stage of developmentZhang posited that this dichotomy could lead to an industry bubble as expecting substantial growth is marred by the harsh truths of present capabilities.

Zhang further anticipated that2025 could mark a pivotal moment for AI chip procurement domestically, predicting a dramatic rise in shipments for companies like Cambrian Technologies

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The expectation is that the competitive landscape will shift, diminishing Nvidia's current market shareHe elaborated on how existing bubbles in the market may reflect a collective anticipation of accelerated domestic substitutions within the next one to two years.

Despite not turning a profit, Cambrian’s expenditure on research and development (R&D) has consistently surpassed its revenueAccording to its third-quarter report for 2024, R&D spending amounted to 659 million yuan, a staggering 355.65% of the company's total revenue during the same periodHowever, recent trends indicate a reduction in R&D investmentsBetween 2022 and the third quarter of 2024, spending on research decreased from 1.523 billion yuan to 659 million yuan, marking declines of 26.63% and 8.13% year-over-year.

The company also saw a continuum of layoffs within its R&D teams, with personnel figures dwindling from 1,205 in 2022 to 727 in the first half of 2024. Industry insights suggest that domestic manufacturers still grapple with a substantial performance gap compared to Nvidia’s offerings, estimated to be two generations behind

However, the pathway for breakthrough innovations is not completely closed, with many analysts advocating for a pivot away from direct competition with established giants like Nvidia and instead focusing on carving out niche applications within the market.

One investor, who has closely observed developments in the AI chip sector, suggested that the key to success for Chinese manufacturers lies in identifying specific application scenarios, emphasizing a strategic shift rather than simplistic comparisons to Nvidia's established benchmarksClimbing a steep technological curve is presented as a daunting task for these companies unless they can effectively allocate capital and resources towards meaningful advancements.

Another avenue through which domestic firms might find success is the construction of computational clustersWhile individual card performances still display significant discrepancies, leveraging technologies such as multi-card cluster capabilities provides a viable strategy to offset single-card limitations

Zhang posited that although single-card comparisons may seem crucial, they do not adequately capture the potential of collaboration and optimization in the operations of domestic chip companies.

When looking at shareholder dynamics, it is noteworthy that Chen Tian Shi, Cambrian’s chairman, holds a commanding 28.63% stake in the companyAccording to market capitalization data, as of January 15, Cambrian’s market value teetered at approximately 2,977 billion yuan, translating to a market worth of around 852 billion yuan for Chen’s sharesHowever, this value witnessed a decline alongside the company’s stock price, illustrating the inherent risks shareholders face amidst speculationsFollowing a swift dip, the latest market valuation for Cambrian dropped to 2,471 billion yuan, resulting in a significant erosion of Chen’s paper wealth, amounting to nearly 14.5 billion yuan within a mere two trading days.