China chipmaker Moore Threads soars 502% after eight billion yuan IPO

MOORE Threads Technology, a leading Chinese artificial intelligence (AI) chipmaker, surged in its Shanghai trading debut after raising eight billion yuan (S$1.5 billion) in the year’s second-largest onshore initial public offering (IPO).

The firm’s stock soared as much as 502 per cent after being sold at 114.28 yuan a piece during the IPO. If gains hold, the debut would mark the biggest first-day pop for an IPO over US$1 billion since China’s 2019 IPO reforms, according to data compiled by Bloomberg.

The listing comes as optimism over China’s drive for tech self-sufficiency intensifies, fuelled by trade tensions and fears of US technology curbs. Moore Threads’ share frenzy stands out in an otherwise sluggish market, signalling strong investor appetite in specific sectors like this year’s AI winners.

Beijing-based Moore Threads is also among those benefiting from a market share void left by Nvidia’s forced exit. Earlier this year, regulators eased listing rules for unprofitable firms on the Nasdaq-style Star Board to bolster homegrown startups.

“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, chief investment officer at Ying An Asset Management. “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.”

Proceeds from the IPO will fund next-generation projects in AI and graphics chips as well as supplement working capital. The offering ranks behind Huadian New Energy Group’s US$2.7 billion IPO in July. Investor interest in the offering was strong, with the retail portion oversubscribed 2,750 times even after a clawback, making it the second most sought-after onshore IPO over US$1 billion since 2022, Bloomberg data shows.

Moore Threads’ net loss was 724 million yuan during the first three quarters of the year, according to a Sinolink Securities note, narrowing by 19 per cent from the year ago period. Meanwhile, revenue surged by 182 per cent to 780 million yuan.

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 Dec 4 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 more than 30 per cent this year, with shares of chip designer Cambricon Technologies doubling.

A successful listing could pave the way for others. MetaX Integrated Circuits Shanghai, a closely watched peer, opens subscriptions on Friday. Meanwhile, memory chipmakers Yangtze Memory Technologies and ChangXin Memory Technologies 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. Still, some worry the IPO could syphon funds from peers, adding pressure to the market, he added. BLOOMBERG