By Sherry Qin
Beijing's bid for AI supremacy has been hobbled by a reliance on imported semiconductors. To fix that, it is tapping home-grown startups as it looks for the DeepSeek of chip-making.
There is no shortage of promising candidates but most are unprofitable, and they will need to spend heavily to close the gap on foreign-made chips.
Chinese companies' access to advanced accelerators is a critical bottleneck, Macquarie analysts said. The U.S. holds 75% of the world's computational power, China has just 15%, they added, citing data from research institute Epoch AI.
A reform that loosens stock market listing rules could help local chipmakers catch up, giving them access to fresh funding.
"Capital markets serve as a critical lifeline" for China's tech startups, said Terence Ho, EY's Greater China IPO leader.
Regulators over the summer re-opened a pathway for unprofitable startups in strategic industries to list on Shanghai's Nasdaq-like Science and Technology Innovation Board, or STAR. The change is now starting to bear fruit.
Moore Threads, dubbed by some as China's answer to Nvidia, has been the first to go public via that route. Shares of the Beijing-based AI-chip maker surged 425% in its debut last week, putting its market value at roughly $55 billion.
MetaX, which along with Moore is in the club of "Little Dragons" seen as highly promising chip startups, will list soon as well.
Though both have recorded steep losses as they invest heavily in research and development, the relaxed rules mean that even firms with zero revenue can go public. All they need is an estimated market capitalization of at least $566.7 million and products with high growth potential.
It only took 88 days for Moore Threads to get the green light for IPO--one of the fastest-ever approvals in China.
"The rapid approval is a perfect example of the 'unconventional measures' mentioned in the [five-year] plan to overcome bottlenecks in core technologies," said Ho at EY.
The shift aligns with China's latest five-year plan, which has made tech self-reliance its top priority, analysts say. But policy support and more funding don't guarantee companies will turn profitable, nor that chip makers can close the gap with foreign counterparts, especially in a field that requires heavy capex.
Moore Threads, founded in 2020 by former Nvidia executive Zhang Jianzhong, warned on Friday that its revenue growth could slow, raising the risk that it will continue to post losses and miss its profitability target.
MetaX, established by ex-AMD employees, has also yet to turn a profit.
Still, just as investors poured billions into China's tech sector since the "DeepSeek moment" in January when the Hangzhou-based startup released a large-language model to rival OpenAI's ChatGPT, a similar influx could flow into chip companies as more go public.
EY's Ho thinks investors are well aware of the challenges the startups face and the market's focus has been shifting from short-term profitability to long-term value.
Moore Threads' blockbuster debut signals market confidence in China's tech self-sufficiency drive. Other stocks aligned with tech autonomy reflect that too.
Shares of AI chip maker Cambricon Technologies, which listed in 2020, and those of Hong Kong-listed SMIC, China's biggest chip foundry, have more than doubled so far this year.
Getting that self-reliance tag opens the doors to government and private-sector money, even if their financials remain unconvincing.
"Whether a company is profitable or not is not the most important factor we consider when we invest, " said Angela Cheng, chief macro strategist at CGS International, owned by Chinese sovereign fund China Investment Corp.
Write to Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
December 12, 2025 06:00 ET (11:00 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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