This Chip Stock Is Soaring Amid Nvidia’s China Problems. The AI War Has Taken a Turn.

China is seeking to boost domestic production of artificial-intelligence chips. (AFP via Getty Images)

Nvidia isn’t going to be able to sell its chips in China for the foreseeable future. That’s great news for Cambricon Technologies, the Chinese chip maker aiming to become the domestic alternative for artificial-intelligence processors.

Cambricon shares closed 16% higher in Shanghai trading on Thursday, after Nvidia said it wasn’t forecasting any sales of its H20 chip for the Chinese market in the current quarter.

Cambricon is in the spotlight after reporting this week that its quarterly revenue rose by around 4,000% amid surging demand for domestic AI chips. The Chinese government has discouraged companies from buying Nvidia’s hardware, according to The Wall Street Journal.

That has led to a boom in the stocks of domestic Chinese companies. Cambricon shares are up more than sixfold in the past year. Cambricon issued a filing on Thursday, noting the major rise in its share price. It said it has no plan to launch any new products and expects full-year operating revenue of 5 billion yuan to 7 billion yuan ($698.9 million-$978.5 million), according to a translation using automated tools. Cambricon has a market cap of 574 billion yuan as of Thursday’s close in local trading.

How far the rally can go will likely depend on whether Nvidia can convince Beijing and Washington to allow it to sell AI chips to Chinese customers. Nvidia CEO Jensen Huang noted China represents a $50 billion market for AI infrastructure, growing at 50% a year, and said there was a “real possibility” it would be able to sell its more advanced Blackwell chips there in future.

Cambricon’s chips are not as good as Nvidia’s but they are improving—its Siyuan 690 processor is expected to approach the performance of Nvidia’s H100, according to the South China Morning Post. That would make it superior to the H20, which has purposefully limited capabilities to meet U.S. export controls, although factors such as energy usage and software compatibility can make head-to-head comparisons difficult.

Cambricon did not respond to Barron’s request for comment.

Another issue for Cambricon, apart from performance, is whether it can produce chips at sufficient scale. Its AI chip shipments are set to come to around 143,000 units this year, according to Goldman Sachs, while Nvidia shipped around one million of its H20 chips for the Chinese market last year.

Chinese chip makers as a whole are aiming to triple their output of AI chips in 2026, with three fabrication plants under construction in the country, according to the Financial Times, which cited people with knowledge of the plans.

While the new plants are designed to support output from Huawei Technologies, expanded capacity at chip manufacturer Semiconductor Manufacturing International will allow smaller designers such as Cambricon to increase their own output, the FT reported.

Write to Adam Clark at adam.clark@barrons.com