After raising 8 billion yuan ($1.13 billion), Moore Threads Technology Co., a prominent Chinese artificial intelligence chipmaker, saw a 425% increase in its Shanghai trading debut. This is the largest first-day pop for a major IPO since China's 2019 reforms.
Investor interest in the IPO was high, and even after a clawback, the retail piece was oversubscribed by about 2,750 times.
To take the top rank among IPOs over $1 billion, its launch doubled Semiconductor Manufacturing International Corp.'s 202% increase in 2020.
The listing of Moore Threads coincides with growing confidence over China's pursuit of technological self-sufficiency, which is spurred by trade tensions and concerns about US technology restrictions.
In an effort to support domestic businesses, regulators loosened listing requirements for unprofitable companies on the Nasdaq-style Star Board earlier this year.
According to Shao Qifeng, chief investment officer of Ying An Asset Management Co., "a surge of this scale can be somewhat expected from the strong demand, and this is one of those flagship IPOs that will go on in history and be remembered."
"However, in my experience, such noteworthy initial public offerings (IPOs) don't always portend well for their respective industries because they may be a sign of froth, at least in certain areas."
The Beijing-based business is now competing with Huawei Technologies Co. and Cambricon Technologies Corp. for market dominance following Nvidia Corp.'s forced exit. As it competes with the US behemoth, Baidu Inc. is also thinking of launching an AI chip division to attract investor interest.
In an otherwise slow market, Moore Threads' share frenzy sticks out, indicating strong investor appetite in particular industries like this year's AI champions.
At closing, the company's market value was 282.3 billion yuan, which is roughly half of Cambricon's 571.4 billion yuan. Shenzhen H&T Intelligent Control Co., which has a small investment in the company, fell 10% as a result of Friday's advances, which also prompted a rotation out of related equities.
The IPO's proceeds will augment working capital and finance next-generation AI and graphics chip research. After Huadian New Energy Group Co.'s $2.7 billion listing in July, this transaction is the second-largest onshore IPO of the year.
According to a report from Sinolink Securities, Moore Threads' net loss for the first three quarters of the year was 724 million yuan, which was 19% less than the same period last year. In the meantime, revenue reached 780 million yuan, an 182% increase.
Its valuations are still high, nevertheless. According to a Dec. 4 filing, Moore Threads' price to sales ratio is greater than the average of 111 times for peers at 123 times the offer price of 114.28 yuan per share. Recently, the company requested that its lead sponsor remind investors of the dangers associated with its values.
Moore Threads was founded in 2020 by Zhang Jianzhong, a former executive at Nvidia. Initially, the company made money from graphics processors for gaming and visual rendering before switching to AI accelerators for huge language models.
The US Commerce Department's addition of the company to its entity list in October 2023, which prevented access to critical technologies, was a significant setback that led to restructuring and layoffs.
Despite the setback, Beijing's promotion of the industry as a crucial component of its drive for technological superiority has only increased investor excitement.
With shares of chip manufacturer Cambricon tripling, the Star 50 Index, which monitors the largest businesses on the Star Board, has increased by 34% this year.
Others may follow in the footsteps of a successful listing. A carefully regarded peer, MetaX Integrated Circuits Shanghai Co., began accepting subscribers on Friday.
Yangtze Memory Technologies Co. and ChangXin Memory Technologies Inc., two memory chip manufacturers, are considering onshore initial public offerings (IPOs) with potential valuations of up to 300 billion yuan.
Chen Zunde, a fund manager at Guangdong Fund Investment Co., stated that recent listings have done well since market mood has been muted, "so it makes sense for a sizable jump at its debut," alluding to investors who are still enthused about new listings.
However, some are concerned that the IPO would steal money from competitors, which would put more strain on the market, he continued.
