Investors are set to keep chasing Cambricon Technologies even as a shake-up in a key Chinese tech gauge threatens heavy passive selling. A quarterly STAR50 reshuffle is expected to trigger over 8 billion yuan in passive outflows, yet demand for Cambricon remains strong. The AI chip designer’s stock more than doubled in August, pushing its share of the tech-focused benchmark above the 10% cap for a single stock. The spike triggered the adjustment and stirred worries about near-term swings, but many investors view the reshuffle as routine rather than a change in the outlook. Cambricon fell 14% last week on profit-taking and rebalancing fears, then rebounded, gaining 10% this week. Even after the moves, the company’s valuation stands out. It trades at 521 times trailing earnings versus about 50 times for Nvidia, according to LSEG. Portfolio managers and analysts say the technical cutback is unlikely to derail China’s AI run. Beijing’s push for technology self-reliance is expected to speed sector growth and let China mirror parts of the U.S. AI upswing. “Maybe some investors will use it as a reason to take profit, but I don’t think that will affect the long-term trend,” or the positioning of fundamentals-driven active funds, said Shihao Li, research analyst at CLSA, as mentioned in a Reuters report. China’s AI trade has helped power the domestic bull market Gains have been supported by state backing for home-grown innovation, the DeepSeek breakthrough, and large AI spending by Alibaba, Tencent, and Baidu. Globally, enthusiasm has lifted the Nasdaq to records, aided by Nvidia’s 32% rise this year. Cambricon shares have risen 113% in 2025, with most of that jump coming last month after it posted a first-half profit. “There is now more optimism that China’s AI industry has passed a turning point, and entered a self-sustaining cycle of rising investment and higher profitability,” said Tilly Zhang, analyst at Gavekal Dragonomics. “The narrative that China can replicate at least part of the U.S. AI boom no longer seems so far-fetched.” Founded in 2016, the Beijing chipmaker listed on Shanghai’s STAR Market in 2020. It has since gone from a niche player to a market leader. The mainland tech rally is in its twelfth month. Onshore stocks have closed the gap with offshore peers, lifting Shanghai stocks to levels last seen a decade ago. The CSI AI Index has jumped 60% so far this year, outpacing the roughly 15% rise in the CSI300 and the Shanghai Composite. Cambricon’s rise has raised valuation questions The company issued a risk warning last month as its market price raced ahead. Its latest results showed first-half revenue leaping to 2.9 billion yuan, from 64.8 million yuan a year earlier, with a swing to about 1 billion yuan in profit. As Cryptopolitan reported previously, Cambricon’s revenue jumped 4000% ahead of Nvidia’s earnings. For the full year, it projects operating revenue between 5 billion and 7 billion yuan. “Investors are torn between hoping Cambricon can succeed in replacing foreign AI chips and avoiding blowing up a speculative bubble,” said Abraham Zhang, chairman of China Europe Capital. For now, the focus is on whether the company can sustain profitability and meet demand for its AI processors. Guangdong-based hedge fund manager Xu Qiongna said that although Cambricon looks far pricier than Nvidia , rapid growth tied to China’s drive to swap out foreign technologies could make the multiple easier to defend. Tang Yibing, a portfolio manager at Bosera’s STAR 50 Index Fund, said performance across the tech complex depends more on industry trends and earnings delivery than index mechanics. The STAR50 has gained 5% this week. The smartest crypto minds already read our newsletter. Want in? Join them .
