Cambricon : A Feasibility Report on the Transition from a "Demon Stock" to a Pioneer of New Quality Productive Forces
- Dr Frederick Wong
- Sep 1
- 5 min read
I. Foreword: When the Term "Demon Stock" is Redefined
In the A-share market, "demon stock" was once synonymous with high turnover, high leverage, and high volatility. Today, the meaning of "demon" is being rewritten by Cambricon (688256.SH). In seven years, it has leaped from a paper by the Chinese Academy of Sciences to a representative of "new quality productive forces," and in August 2025, it briefly surpassed Moutai to become the "king of stocks" in a nationwide discussion. This article analyzes how its speculative "demonic" nature transformed into the tangible strength of a new quality productive force, whether this path is sustainable, and how investors can participate without getting burned.
II. Origin of a "Demon Stock": From a Gifted Youth's Thesis to a Hundred-Billion Market Cap
In 2016, in a corridor of the Institute of Computing Technology at the Chinese Academy of Sciences, brothers Chen Tianshi and Chen Yunji—both products of the "Gifted Youth Class"—turned their ASPLOS Best Paper award-winning AI chip architecture into a company. They named it "Cambricon," symbolizing a "Cambrian explosion" of AI computing power.
2017: The world's first terminal AI chip, the Cambricon 1A, was integrated into the Huawei Mate 10, establishing its god-like technical reputation.
2020: Listed on the STAR Market, its market value exceeded 100 billion RMB on the first day, while its revenue was less than 300 million RMB. A price-to-sales ratio of over 100x laid the genetic groundwork for its "demon stock" status.
2022: Placed on the U.S. Entity List, cutting off its supply of TSMC's 7nm chips. The stock price hit a low of 54 RMB—the market thought the story was over.
2023 Q4: DeepSeek-V3 was released, and the official statement, "Cambricon 590 is the top choice for next-generation inference," went viral instantly.
2024 Q4: The U.S. halted production of the H20, and short videos about "domestic substitution" went viral. The stock price soared from 600 to 1595 RMB, and the "demon stock" officially ascended to "supernova" status.
III. The Three Tailwinds: The Underlying Logic of the Rise of a New Quality Productive Force
DeepSeek: The Killer Application
With a 128K long context and a 75% reduction in training costs, it was the only inference card officially named by the DeepSeek team.
After proving its "usability," domestic chips shifted from being a "gap-filler" to a "top choice."
Domestic Substitution: A Policy Imperative
A 2024 central government directive mandated that "the procurement ratio of domestic AI chips must be ≥70%," securing Cambricon contracts for 14 intelligent computing centers.
There is a market gap of 10 million AI accelerator cards, and Cambricon's market share is expected to increase from 5% to 30%.
Nvidia's Absence: A Supply Vacuum
With the H20 production halt and the H100 sales ban, a 100-billion-RMB annual gap needs to be filled by domestic products.
The Cambricon 590 series achieves 80% of the A100's FP16 computing power with 15% lower power consumption, making it the "politically correct" choice in public tenders.
IV. A Stunning Financial Turnaround: From a 500 Million Loss to a 1 Billion Profit
The H1 2025 financial report shows:
Revenue: 2.881 billion RMB, a year-on-year increase of 4347%.
Net Profit: 1.038 billion RMB, achieving profitability for the first time since disclosures began in 2017.
Operating Cash Flow: 911 million RMB, compared to -631 million RMB in the same period last year, indicating a "self-sustaining" ability to fund R&D and expansion.
Gross Margin: 56%, confirming the product has transitioned from the "sample sales" stage to the "mass production" stage.
In short, achieving profitability was the "coming-of-age ceremony" for the "demon stock" in its evolution into a new quality productive force.
V. Technical Strength Assessment: Can It Support the "New Quality Productive Force" Title?
Hardware: The Siyuan 590 (7nm) delivers 512 TFLOPS of FP16 performance, approximately 80% of the A100, with 15% lower power consumption.
Software: The NeuWare platform has native integration with TensorFlow and PyTorch and provides "one-click migration" scripts for models like DeepSeek, Tongyi Qianwen, and Hunyuan.
Patents: A total of 2,774 patent applications filed, with 1,599 granted, covering the entire chain of instruction sets, microarchitectures, and compilers.
Ecosystem Shortcoming: There is still a 3–5 year gap compared to the CUDA ecosystem, but being "usable" is sufficient to seize the first-mover advantage during the blockade period.
VI. External Validation: What Do Major International Banks and the Industry Chain Think?
Goldman Sachs: Set a 12-month price target of 1835 RMB, citing the surge in China's cloud capital expenditure and the diversification of chip platforms.
JPMorgan Chase: A "dream price" of 2500 RMB was rumored, and although no official report has been seen, it has spread like wildfire in WeChat groups.
Industry Chain: SMIC's 7nm Enhanced process is in mass production with a yield rate of over 80%, providing a "domestic safety cushion" for Cambricon.
In short, external endorsements have given the "demon stock" the status of a "regular army."
VII. Risk Radar: The Four Hurdles for a New Quality Productive Force
Customer Concentration: The top five customers contribute 70% of revenue. Any slowdown in tenders could lead to dramatic performance fluctuations.
Intensifying Competition: Full-stack competitors like Huawei Ascend, MetaX, and Biren Technology have similar hardware performance and more complete ecosystems.
Technological Iteration: If Nvidia launches a more cost-effective architecture in 2026, the domestic substitution narrative will be forced to "upgrade."
Overstretched Valuation: The static P/E ratio exceeds 300x. Any earnings miss could trigger a sharp correction.
VIII. Dual-Track Valuation: Splitting 1587 RMB into Two Parallel Lines
Value Line (DCF): 800 RMB
Assuming the domestic AI chip market reaches 100 billion RMB by 2027, with Cambricon holding a stable market share of 25% and a net profit margin of 25%, the free cash flow would be 6.3 billion. With a discount rate of 8%, the intrinsic value is 800 RMB.
Sentiment Line (Event-Driven): +800 RMB
Based on a 30-billion-RMB revenue gap from the sales ban, multiplied by a 3x event-driven Price-to-Sales (PS) multiple, plus the value of option leverage.
Strategy:
≤ 800 RMB = Green Investment Zone: Suitable for buying on dips.
1200–1600 RMB = Red Speculation Zone: For quick-in, quick-out trades.
Always keep 20% cash reserved for the next market mismatch.
IX. Words of Wisdom: How to Stay Sober During the "Cambricon Rally"
Distinguish Between "Narrative" and "Cash Flow"
Narrative: The story of AI large models + domestic substitution + Nvidia's sales ban is compelling enough to suggest 10x potential.
Cash Flow: Can the quarterly profit be sustained? Can the mass production yield, customer stickiness, and R&D intensity support a 300x P/E ratio?
Distinguish Between "Institutional Allocation" and "Speculative Hot Money"
Allocation Funds: Index funds and long-term funds hold positions passively or semi-actively, resulting in lower volatility.
Sentiment-Driven Funds: The "Dragon and Tiger List" shows turnover rates exceeding 20% over three days. Once the trend reverses, the stock could hit its daily downward limit.
Allocate over 30% of your position based on verifiable performance (signed orders, rising gross margins), not grand narratives.
X. Conclusion: Standing on Moutai's Shoulders, Gazing at the Stars of Computing Power
A decade ago, Moutai was the icon of the "old economy." A decade later, Cambricon has become the totem of "new quality productive forces."
It is a symbol of a technological breakthrough, a reflection of policy will, and a magnifying glass for market sentiment.
Remember this sentence: "The changing of the 'king of stocks' is never the victory of a single company, but the choice of an era."
In the future landscape of digital China, whether Cambricon can truly unleash the full potential of AI computing power is an answer hidden in every investor's portfolio discipline. May you remember during every bubble: you are watching the spectacle, but you profit from discipline.
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