Can the First AI Chip Stock Turn the Tide with Large Models?

[baoshi.rao]

According to the performance report released by Cambricon (688256.SH) on the evening of February 28, the company achieved an operating revenue of 709 million yuan in 2023, a decrease of 2.70% year-on-year; the net loss was 835 million yuan, narrowing by 33.50% compared to the previous year. Regarding the loss, Cambricon explained that this was mainly due to a reduction in share-based payment expenses allocated by the reporting period compared to the previous year, thereby decreasing administrative expenses for the reporting period.

Cambricon also stated that, in line with its business plan, it further improved R&D efficiency and optimized resource allocation. In 2023, expenditures such as employee compensation decreased compared to the previous year, leading to a reduction in R&D expenses for the reporting period. Additionally, the asset impairment losses recognized in this period were lower than those of the previous year.

2023 was the inaugural year of the collective explosion of large models, and chip companies have become key players in the era of large models. However, Cambricon, crowned as the 'first AI chip stock,' failed to capitalize on this trend to turn its fortunes around. Regarding questions about performance and industry competition, Time Finance contacted Cambricon, but the relevant staff did not provide a clear response, only stating, 'Refer to public information.'

At the beginning of 2023, with the popularity of ChatGPT, AI concept stocks were highly sought after. Cambricon's stock price soared, once exceeding 270 yuan per share, with its market capitalization surpassing the 110 billion yuan mark.

To capitalize on the trend of large models, Cambricon has made significant efforts. According to the company, its products, from the design of the underlying hardware architecture instruction set to subsequent software updates, have been optimized and designed specifically for large models, such as natural language processing applications and AI scenarios. On January 22 this year, Cambricon and Zhixiang Future signed a strategic cooperation agreement in Beijing. Through resource sharing and complementary advantages, the two parties will rely on their respective technical accumulations in the field of large models to continuously adapt products and jointly promote the innovation and implementation of visual large models.

There is no eternal rise in the stock market, and Cambricon's soaring stock price has not continued. Poor performance has led the market to "vote with their feet." In about half a year, Cambricon's stock price has fallen by more than 50%. According to financial report data, Cambricon achieved only 146 million yuan in revenue in the first nine months of 2023, a sharp decrease of 44.84% compared with the same period last year.

In this wave of enthusiasm, NVIDIA has taken center stage with its performance soaring. Financial reports show that in the fourth quarter of 2023, the company achieved revenue of $22.1 billion, a staggering 265% year-on-year increase; net profit reached $12.285 billion, surging by 769%. Its market capitalization has also been rising steadily. On the evening of February 22, NVIDIA's market capitalization surpassed Amazon and Google, approaching $2 trillion, making it the third-largest in the U.S. stock market and the fourth-largest globally.

Cambricon has publicly stated that in the cloud intelligent computing market and edge intelligent computing market, the current market share is mainly occupied by companies like NVIDIA. In the intelligent computing cluster system market, clusters based on NVIDIA's GPU products hold a dominant position. In terms of industrial chain ecosystem architecture, the company's self-developed basic system software platform still lags behind NVIDIA in terms of ecosystem maturity.

Cambricon's profitability prospects remain difficult to predict, with a net loss of 835 million yuan in 2023, which has narrowed by 33.50% compared to 2022. From 2017 to 2022, the years during which Cambricon disclosed its financial data, the company reported losses of 381 million yuan, 41 million yuan, 1.179 billion yuan, 435 million yuan, 825 million yuan, and 1.257 billion yuan, respectively. Including the losses from 2023, Cambricon has accumulated nearly 5 billion yuan in losses over seven years.

Changes in Cambricon's administrative and R&D expenses have drawn attention. The company announced at the end of January that it expects its 2023 administrative expenses to be between 135 million yuan and 165 million yuan, a decrease of 44.38%-54.49% compared to the previous year's administrative expenses of 297 million yuan. This reduction is primarily due to a decrease in the share-based payment expenses allocated by the company, leading to a significant year-on-year decline in administrative expenses.

The reduction in R&D expenses is even more notable. Cambricon anticipates its 2023 R&D expenses to be between 999 million yuan and 1.221 billion yuan, a decrease of 19.83%-34.41% compared to the previous year's R&D expenses of 1.523 billion yuan. This is mainly attributed to the company's business strategy, which focuses on improving R&D efficiency and optimizing resource allocation, resulting in lower R&D expenses compared to the same period last year. An industry insider told Time Finance that the chip business is a capital-intensive industry. With surging demand in the sector, the decline in R&D expenses seems unusual.

In fact, over the past year, this leading chip company has also been under the shadow of layoffs.

In April and July 2023, media reports revealed that Cambricon underwent two rounds of layoffs. The July layoffs particularly hit the smart driving chip business unit, Xingge Technology, the hardest. Reports indicated that nearly half of the software team was cut, while only a few hardware employees were retained to "wrap up" projects. Additionally, new projects have been suspended and may potentially be abandoned in the future. According to Cambricon's 2023 semi-annual report, as of the end of June 2023, the company had 980 R&D personnel, a decrease of over 200 compared to the end of 2022.

Since 2023, early shareholders have also parted ways with Cambricon, with Nanjing Zhaoyin, Hubei Zhaoyin, Ancient Era Venture Capital, and SDIC Venture Capital collectively reducing their holdings by more than 3 billion yuan.

"Cambricon is basically not in the first tier of consideration for practitioners, and the overall development momentum of the company has fallen short of expectations," a chip engineer told Times Finance.