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Shares of the Chinese AI chipmaker jumped after securing regulatory approval for a private placement totaling approximately $560 million USD, following a significant increase in value last month. The company’s stock closed up 3.7% at roughly $179 in Shanghai, after earlier climbing nearly 8%. While the stock surged 124% in August, it has fallen about 20% since reaching a peak on August 28, likely influenced by the upcoming reduction of its weighting in the Star 50 Index.
Recently, the China Securities Regulatory Commission approved the company’s plan for a private share offering. The company first announced its intention to raise nearly $750 million USD in April, but revised the target downward in July to about $560 million USD due to an increase in total equity resulting from a stock incentive plan.
The capital raised will be allocated towards developing a chip platform and a software platform for large AI models, as well as enhancing working capital. The only modification was a reduction in the funding for each project. The company mainly focuses on designing, developing, and selling AI core chips used in cloud servers, edge computing devices, and terminal equipment.
In the first half of this year, the company reported a net profit of around $150 million USD, a turnaround from a loss of roughly $74 million USD the previous year. This improvement was driven by rising domestic demand for semiconductors amid a national effort to boost technological independence. Revenue surged 44-fold to nearly $430 million USD.
The stock hit an all-time high of about $238 USD on August 28, briefly making it the most valuable stock on China’s mainland market. However, on the same day, the company warned investors that its share price might be disconnected from its fundamentals, noting that its price-to-earnings ratio exceeded 5,000, well above industry standards.
The company projects its revenue to increase between 317% and 483%, reaching between $770 million USD and $1 billion USD this year. This outlook is preliminary and not a formal commitment, with a reminder to investors and stakeholders to consider risks involved.
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