After the U.S. government added 25 Chinese companies to its export control “blacklist,” China’s entire technology sector suffered a heavy blow. Just on January 16th alone, the total market value of China’s top three technology giants – the AI chip leader Cambricon Technologies, ZTE, and SMIC – evaporated by more than 68 billion yuan.
On January 16th, the A-share market surged and then fell throughout the day, with the artificial intelligence index turning from a rise to a fall. Sectors such as humanoid robots, semiconductors, liquor, and military industries led the declines. In the morning of that day, Cambricon Technologies, known as the “number one in China’s AI,” continued to be dumped by large orders after the market retreated, with its stock price plummeting from the opening price of 688 yuan to 580 yuan.
By the close of trading, Cambricon Technologies’ stock price had fallen by 14.65% to 594 yuan, with a current market value of approximately 247.969 billion yuan. Compared to the intraday high of 777.77 yuan the previous Friday, it had experienced a maximum drop of 34%, evaporating over 40 billion yuan in market value from the previous trading day.
Not only Cambricon Technologies, but the entire technology sector, especially AI chip stocks, came under pressure.
ZTE (A-share) closed at 39.96 yuan on January 16th, down 2.35%, with a total market value of 191.15 billion yuan. This marked a loss of nearly 4.6 billion yuan compared to the previous trading day’s market value of 195.742 billion yuan. ZTE H shares in Hong Kong fell by 4.59%.
In addition, as China’s largest integrated circuit chip manufacturing company, SMIC saw a 2.96% decline on January 16th, with a total market value of 770.544 billion yuan. This was a drop of over 23.5 billion yuan compared to the previous trading day’s market value of 794.075 billion yuan.
On the news front, just before the plunge in Chinese AI chip stocks, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) revised the Export Administration Regulations (EAR) on Wednesday, January 15, issuing two final rules that placed 25 Chinese companies on the export control list.
The 25 Chinese companies included in the Entity List cover multiple areas, including artificial intelligence, semiconductors, quantum technology, and other high-tech fields. This is the first time that the U.S. has placed large Chinese AI model companies on the Entity List. All companies listed on the Entity List will face stricter licensing requirements when importing items into the United States.
The Department of Commerce stated that these Chinese companies were blacklisted because they engaged in activities that pose a threat to U.S. national security by developing and integrating advanced artificial intelligence research to promote China’s military modernization or being involved in the development of lithography technology production facilities for advanced nodes by the Chinese Communist Party.
Commerce Secretary Gina Raimondo said, “These rules will further target and strengthen our controls to help ensure that the efforts of (the CCP) and others who are trying to evade our laws and undermine U.S. national security fail.”
As the “number one in China’s AI chips,” in addition to external pressures, Cambricon Technologies had previously announced on January 14th an expected net loss of between 396 million yuan and 484 million yuan for 2024.
According to reports from mainland China, Chen Tianshi founded Cambricon Technologies in 2016, focusing on the R&D of artificial intelligence chip products. Before its IPO, the company, established only four years prior, completed seven rounds of financing, raising over 4.5 billion yuan in total. Investors included iFlytek, Prime Venture Partners, Alibaba, Lenovo Capital, and CICC.
On July 20, 2020, Cambricon Technologies reached a peak stock price of 295 yuan on its first day of listing. However, the company’s stock price performance post-IPO resembled a rollercoaster ride. Recently, while Cambricon Technologies’ stock price soared, there was a divergence in the market regarding the company’s future prospects. In its eight-year history since its founding, Cambricon Technologies has yet to achieve profitability.
According to financial data, from 2017 to 2023, Cambricon Technologies reported losses of 381 million yuan, 41 million yuan, 1.179 billion yuan, 435 million yuan, 825 million yuan, 1.256 billion yuan, and 848 million yuan. As of the first three quarters of 2024, it continued to report a loss of 724 million yuan, accumulating losses exceeding 5 billion yuan, at one point being included in the top ten list of money-losing companies on the Sci-Tech Innovation Board.
Due to worsening losses, Cambricon Technologies’ cash flow was also tight. Financial reports showed that as of the first three quarters of 2024, the company’s end-of-period cash and cash equivalents balance stood at 958 million yuan.