(Dec 5): Moore Threads Technology Co, a leading Chinese artificial intelligence (AI) chipmaker, jumped 425% in its Shanghai trading debut on Friday after raising eight billion yuan (US$1.13 billion or $1.47 billion), marking the biggest first-day pop for a major initial public offering (IPO) since China’s 2019 reforms.
The IPO drew strong investor interest, with the retail portion oversubscribed some 2,750 times even after a clawback. Its debut doubled that of Semiconductor Manufacturing International Corp’s (SMIC) 202% surge in 2020 to secure the top spot among IPOs larger than US$1 billion.
Moore Threads’ listing comes as optimism over China’s drive for tech self-sufficiency intensifies, fuelled by trade tensions and fears of US technology curbs. Earlier this year, regulators eased listing rules for unprofitable firms on the Nasdaq-style Star Board to bolster home-grown start-ups.
“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,” said Shao Qifeng, the chief investment officer of Ying An Asset Management Co. “However, from experience, such memorable IPOs don’t always bode well for their respective sectors as could be an indication of froth, at least in some corners.”
The Beijing-based company has emerged a contender alongside Cambricon Technologies Corp and Huawei Technologies Co in the race to fill a market share voice left after Nvidia Corp’s forced exit. Baidu Inc is also considering listing an AI chip unit to tap investor interest as it competes with the US giant.
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Moore Threads’ share frenzy stands out in an otherwise sluggish market, signalling strong investor appetite in specific sectors like this year’s AI winners. The company closed with a market capitalisation of 282.3 billion yuan, about half of Cambricon’s 571.4 billion yuan. Friday’s gains also spurred a rotation out of related stocks, with Shenzhen H&T Intelligent Control Co, which holds a minor stake the company, tumbling 10%.
Proceeds from the IPO will fund next-generation projects in AI and graphics chips as well as supplement working capital. The offering is the year’s second-largest onshore IPO, trailing only Huadian New Energy Group Co’s US$2.7 billion listing in July.
During the first three quarters of the year, Moore Threads’ net loss was 724 million yuan, according to a Sinolink Securities note, narrowing by 19% from the year ago period. Meanwhile, revenue surged by 182% to 780 million yuan.
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Still, its valuations remain lofty. Moore Threads’ price to sales ratio at 123 times the offer price of 114.28 yuan per share is higher than the average of 111 times for peers, according to a Thursday filing. The company recently asked its lead sponsor to remind investors of risks related to its valuations.
Origins
Founded in 2020 by former Nvidia executive Zhang Jianzhong, Moore Threads had started out earning revenue from graphics chips for gaming and visual rendering before pivoting to AI accelerators used in powering large language models.
A major setback came in October 2023 when the US Commerce Department added the firm to its entity list, barring access to key technologies, a move that resulted in job cuts and restructuring.
Despite the setback, investor optimism has only picked up as Beijing promoted the sector as a key part of its push into technology supremacy. The Star 50 Index, which tracks the biggest companies on the Star Board, has jumped 34% this year, with shares of chip designer Cambricon doubling.
A successful listing could pave the way for others. MetaX Integrated Circuits Shanghai Co, a closely watched peer, opened subscriptions on Friday. Meanwhile, memory chipmakers Yangtze Memory Technologies Co and ChangXin Memory Technologies Inc are weighing onshore IPOs that could value each at up to 300 billion yuan.
Recent listings have performed well because market sentiment has been muted, “so it makes sense for a sizeable jump at its debut”, said Chen Zunde, a fund manager at Guangdong Fund Investment Co, referring to investors still enthusiastic towards new listings. Still, some worry the IPO could siphon funds from peers, adding pressure to the market, he added.
Uploaded by Tham Yek Lee
