The core logic behind the wave of domestic AI chip companies going public

Since the end of 2025, the domestic AI chip sector has seen an unprecedented wave of IPOs: $Cambricon (688256.SH)$ Stock prices once surpassed Kweichow Maotai (600519.SH). On their first day of listing on the STAR Market, Moore Threads-U (688795.SH) and Maxi Technologies-U (688802.SH) opened with surges of 468.78% and 568.83%, respectively.$BIREN TECH (06082.HK)$ On its first day of listing in Hong Kong, it surged by 75.82%.

Recently, there have been rumors $BABA-W (09988.HK)$ that it may spin off its chip company, Pingtouge Semiconductor, for an independent listing. Additionally, $BIDU-SW (09888.HK)$ it was revealed that its chip company, Kunlun Chip, has confidentially submitted an IPO application to the Hong Kong Stock Exchange (00388.HK).

These announcements triggered significant increases in Alibaba and Baidu's stock prices. After the news broke, Alibaba’s ADR price rose over 5%. Since Baidu officially announced the planned spin-off of Kunlun Chip in early December 2025, its H-share price has cumulatively increased by more than 30%.

In addition, Suiyuan Technology, in which Tencent (00700.HK) holds the largest stake and is also its largest client, also plans to go public on the STAR Market. Recently, its IPO application has been accepted.

For the time being, domestic AI chip companies are going public on the capital market with a 'collective charge' momentum. While these AI chips seem to be riding the wave of computing power towards the capital market, they actually represent two or even three different types of industrial players taking their own paths to capitalization. Among them, Suiyuan Technology, as an 'independently operated chip company deeply tied to a tech giant,' differs from purely independent chip startups and also stands apart from spin-offs of tech giants. Its unique growth model adds a diverse example to the industry.

The underlying commonalities among the three types of entities going public

Whether it is the chip businesses spun off from tech giants, native independent chip companies, or independent chip firms deeply tied to tech giants like Suiyuan Technology, the core driving force behind this wave of IPOs appears highly consistent, driven by industry trends, policy incentives, and capital demands.

Generative AI has triggered an exponential increase in computing power demand, while reliance on high-end computing chips remains high. Policy-driven requirements for self-reliance have created unprecedented substitution opportunities for domestic AI chips, especially given restrictions on NVIDIA (NVDA.US) and AMD (AMD.US) exporting advanced chips. The growth potential of domestically substituted chips has become a consensus in the capital markets, as evidenced by the high valuations assigned to these chip stocks.

Chip R&D is a high-investment, long-cycle, and high-risk endeavor. Activities such as tape-out, ecosystem development, and capacity expansion all require substantial and continuous funding. Relying solely on initial investor capital or depending on parent companies with vast service ecosystems is not sustainable. Going public is undoubtedly the necessary choice for these firms to unlock financing channels and ease R&D pressures.

Whether it is Kunlun Chip and Pingtouge that rely on giant ecosystems, Suiyuan which is closely tied to Tencent, or fully independent companies like Cambricon, all have completed technical validation and entered practical scenarios. An IPO can not only boost brand recognition through capital but also drive products from 'scenario adaptation' towards 'large-scale commercial use,' accelerating market penetration.

The semiconductor industry faces a significant top talent gap, and market-based equity incentives are key to attracting and retaining talent. By binding core personnel through employee stock ownership platforms and further consolidating talent advantages post-IPO via stock options and similar mechanisms.

Core differences among the three types of entities going public

Kunlun Chip and Pingtouge, spun off from tech giants, were initially positioned as cost centers to support group ecosystems, primarily providing customized computing power for their parent companies’ cloud services, large models, and core internet businesses. The main driver for their spin-off IPOs is transforming from a 'cost center' into an 'independent growth engine.' On one hand, they aim to reduce reliance on group cash flow and gain independent financing capabilities; on the other, they aim to unlock the valuation of hard-tech assets and reshape the capital market's perception of their parent companies. For example, rumors of Pingtouge’s IPO directly drove Alibaba’s US stock up by over 5%, while Kunlun Chip's listing added 30% to Baidu’s asset value, following this logic.

Meanwhile, native independent chip companies such as Cambricon, Moore Threads, Muxi, and Biren, have been market-driven entities since inception. These companies lack stable resource backing from larger groups and have long faced situations of heavy R&D spending and insufficient revenue. Their goal in going public is to secure continuous R&D funding, alleviate cash flow pressures, and leverage the branding effects of the capital markets to attract major clients and overcome early-stage commercialization bottlenecks.

Suiyuan Technology demonstrates a unique 'binding synergy advancement' motivation: although not a business spun off from Tencent, it is deeply tied to Tencent’s ecosystem — with Tencent as the largest shareholder and biggest client, providing financial backing, application scenarios, and order support. Its IPO aims both to reduce over-reliance on a single major client and expand its customer base, as well as to deepen synergies with Tencent, leveraging the capital markets to enhance its technological iteration capabilities.

The valuation logic diverges among three types of entities

Behind the capital market's rally, there is a clear divergence in the valuation logic for different types of chip companies

For spin-offs from giants such as Pingtouge and Kunlun Core, the core of their valuation may lie inthe 'ecosystem synergy value' and 'technology spillover potential': Their initial operations are deeply tied to the parent company’s cloud and AI businesses, ensuring stable revenue and profit sources in the early stages post-IPO, which forms the 'anchor' of their valuation; the market places more emphasis on whether their technology can transition from serving internal needs to external markets, achieving true independent commercialization

The level of their valuation may depend on the potential of their products to compete with giants like NVIDIA and local competitors in the open market, as well as the room for imagination regarding their IP licensing and technical services. The market views them as the 'value discount' of the giant’s technological prowess, so the stronger the parent company’s technological foundation, the higher the premium their spun-off chip companies often receive

For natively independent companies like Cambricon, Moore Threads, Muxi, and Biren, their valuations may depend onexpectations regarding technology and the speed of commercializationWithin the grand narrative of domestic substitution, companies with proprietary core architectures and advanced process design capabilities are considered 'core assets,' capable of receiving high valuations even if they suffer substantial short-term losses. The forward-looking nature of their technological roadmap and comparative performance metrics are key supports for their valuation.

As most firms have yet to turn a profit, valuations rely more heavily on revenue growth rates and expectations for future market share. A successful technology implementation or a breakthrough with a major client could cause valuations to soar; conversely, if commercial progress consistently falls short of expectations, valuation bubbles are more likely to burst.

For companies like Suiren Technology, which operate as 'deeply integrated partners', their valuation logic is the most complex and may depend on the potential space for both integration security and independent growth: Tencent, as a cornerstone shareholder and client, provides robust credit endorsement and a business safety net, leading to a reassessment of this part of the business with a certain premium for certainty; however, the market will closely monitor its progress in expanding non-Tencent clients after listing.

Each significant external client win will be seen as a sign of reduced dependency risk and proof of independent competitiveness, potentially triggering an upward revision in valuation.

The 'value unlocking' effect of spin-off transactions on the valuation of tech giants

When tech giants spin off their chip businesses for independent listings, it has profound implications for their own valuations, helping to unlock value.

Prior to the spin-off, the chip business operated as a cost center within tech giants such as Baidu and Alibaba, where large capital expenditures might weigh down the group's overall profitability, while the value of cutting-edge technologies was not fully reflected in market capitalization.

After the spin-off and public listing, the independent chip company gains a market valuation, transforming this value from a 'cost item' within the group into a visible 'asset item,' directly creating new wealth for parent company shareholders. The sharp rise in Alibaba and Baidu's stock prices reflects the market’s immediate response to revaluing these 'hidden tech assets.'

Post-spin-off, the chip business secures its own financing, no longer relying on the parent company for funding to support continuous, high-intensity R&D investment, thus reducing pressure on the parent company's profits and cash flow. This allows financial data from parent companies such as Alibaba and Baidu (especially profitability indicators) to become clearer and optimized, enabling capital markets to focus more on the operational efficiency and growth prospects of their core businesses such as internet platforms, cloud computing, and large AI models. This represents a strategic optimization of the financial structure.

Independently operated chip companies can be more flexible in external collaborations, even serving competitors of their parent companies. This can expand their technological influence and ecosystem scale, transitioning from 'proprietary components' to 'general-purpose components.' For the parent company, this means that its invested chip technology could become one of the industry's de facto standards, securing a strategic advantage within a broader industrial ecosystem and reaping benefits beyond its own business scope.

Conclusion

The 'collective charge' of domestic AI chip companies is far from a simple capital feast. It reveals the most pragmatic paths to capitalization and development chosen by different industry players based on their inherent strengths in the era of localized computing power.

From the value release of 'untethering' from tech giants, to the valuation battles of independent manufacturers competing in the market, and further to the exploration of balancing 'deep integration' models, each type of IPO case is redefining the growth logic and valuation models of China’s hardcore technology companies.

The outcome of this wave of IPOs will not only determine the fate of a group of chip companies but also profoundly influence the strategic landscape and value reassessment of China's tech giants.

Text: Wu Yan

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