This chip stock is soaring amid Nvidia’s China problems. The AI war has taken a turn.

Cambricon Technologies: Riding the Wave of China's AI Chip Boom

Nvidia's recent announcement of zero projected H20 chip sales in China for the current quarter has sent shockwaves through the industry, but for one company, it's a golden opportunity. Cambricon Technologies, a Chinese AI chip maker, is experiencing a meteoric rise, capitalizing on the void left by Nvidia's absence.

Cambricon shares soared 16% in Shanghai on Thursday following Nvidia's announcement. This surge is further fueled by the company's recently reported 4000% quarterly revenue increase, a testament to the surging demand for domestically produced AI chips in China. The Wall Street Journal reports that the Chinese government is actively discouraging the purchase of Nvidia hardware, creating a fertile ground for domestic alternatives.

• Stunning Growth: Cambricon's stock has more than sextupled in the past year.
• Government Support: The Chinese government's push for domestic AI chip development is a major tailwind.
• Closing the Gap: Cambricon's Siyuan 690 processor is expected to rival the performance of Nvidia's H100, potentially surpassing the export-restricted H20.

While Cambricon's chips are not yet on par with Nvidia's in every aspect, the South China Morning Post suggests that the Siyuan 690 is closing the performance gap. However, factors such as energy efficiency and software compatibility remain crucial considerations.

Challenges Remain: Despite its impressive growth, Cambricon faces significant hurdles. Goldman Sachs estimates Cambricon's AI chip shipments will reach approximately 143,000 units this year, a stark contrast to Nvidia's roughly one million H20 chips shipped to China last year. Scaling production to meet the growing demand is a key challenge.

The Bigger Picture: The Financial Times reports that Chinese AI chip manufacturers aim to triple their output by 2026, with new fabrication plants under construction. This expansion, while primarily benefiting Huawei, will also provide opportunities for smaller players like Cambricon to increase their production capacity.

The future of Cambricon, and the broader Chinese AI chip industry, hinges on several factors, including the eventual resolution of Nvidia's sales restrictions in China and Cambricon's ability to successfully scale its operations. The race is on, and Cambricon is clearly a major player to watch.