Chinese investors are betting that CXMT's valuation will soar as much as 10-fold after its Shanghai debut. This massive increase is expected to ride on an AI-led upcycle and Beijing's drive for technological self-sufficiency. The share offering by ChangXin Memory Technologies, valued at $8.6 billion, marks Asia's largest share sale this year.
The Capitalist Gamble
Wu Zhou, a fund manager at Shenzhen Deyuan Investment, plans to bid for new CXMT shares. He anticipates China's top memory chipmaker will eventually challenge global giants like South Korea's Samsung Electronics and SK Hynix. Wu stated, "CXMT's valuation will likely top 3 trillion yuan ($443.33 billion) after listing ... and could even hit 5 trillion yuan." He added that anyone winning the lottery part of the IPO subscription would make money. This projection dwarfs the initial IPO valuation of 579.18 billion yuan, set after the company priced its offering at 8.66 yuan a share one day ago.
Eddie Tam, chief investment officer at Hong Kong's Central Asset Investments, noted that competitors like Micron, Samsung, and SK Hynix are "trillion-dollar-class companies." Tam believes CXMT's IPO valuation appears "very cheap," even considering China's two- to four-year technological lag in DRAM and high-bandwidth memory. He expects CXMT's shares to "surge several-fold" on their first day of trading. Shanghai-based investor Chen Zhi declared, "I will surely subscribe for CXMT shares. It's a no-brainer." He acknowledged the slim chances of winning shares due to China's lottery system for new stock allocation.
The State's Hand
CXMT's public offering, the largest by a Chinese chipmaker, represents Beijing's latest effort to channel capital into strategic industries. These industries are deemed crucial to its rivalry with Washington. The U.S. Department of Defense, under the Biden administration, previously designated CXMT as a Chinese military company. CXMT has stated its intention to use the IPO's proceeds to upgrade production lines and technologies. If an over-allotment option is fully exercised, gross proceeds could reach approximately 66.6 billion yuan.
Profits from Production
CXMT's prospectus revealed first-quarter revenue hit 50.8 billion yuan, a 700% increase from a year earlier. The company recorded a net profit of 25 billion yuan, swinging from a 1.6 billion yuan loss in the prior year. Fund manager Wu expects CXMT's profit to reach 100 billion yuan this year. An official statement from CXMT one day ago valued the company at over 300 times its 2025 earnings and roughly 5 times its book value. While some investors question the sustainability of AI spending and the semiconductor market's high valuations, others dismiss these concerns, citing booming demand for memory chips. This speculative frenzy for CXMT shares contrasts with the experience of Semiconductor Manufacturing International Corp, China's top contract chipmaker, whose stock almost halved within a bit more than two months after its Shanghai listing six years ago. For now, investors place their faith in CXMT's projected earnings growth, anticipating massive surplus extraction.