Chinese AI Chipmakers Pursue IPOs, Banking on Domestic Demand Amid U.S. Sanctions

The U.S. has intensified its curbs on advanced chip sales to China, with recent rules implemented in April banning the shipment of Nvidia's H20 chips, a popular AI accelerator, to the country. Furthermore, restrictions imposed last year prevent Chinese AI chip designers from utilizing advanced global foundries like Taiwan Semiconductor Manufacturing Co. (TSMC) for cutting-edge semiconductor production.

While Moore Threads and MetaX acknowledge U.S. sanctions as a significant developmental risk, their IPO filings underscore a belief that these very restrictions will create substantial market opportunities. Moore Threads, which was added to the U.S. Entity List in late 2023 (thus precluding partnerships with TSMC), stated that "U.S. restrictions on high-end GPU exports to China are prompting Chinese companies to accelerate domestic substitution processes." Similarly, MetaX noted that "geopolitical pressures are forcing relevant domestic clients to use domestically-produced GPU products, which will help domestic GPU manufacturers establish closer ties with local customers and suppliers."

This strategic pivot is not unique to these two firms. Another Chinese AI chipmaker, Biren Technology, recently secured about 1.5 billion yuan in fresh funding and is reportedly preparing for a Hong Kong IPO, as previously reported by Reuters. Beijing's urgency to cultivate homegrown chip champions is increasingly evident as Washington tightens its technological export controls.

Both Moore Threads and MetaX design GPUs that aim to compete with Nvidia's offerings. However, they have reported substantial losses over the past three years, primarily attributing these to intensive research and development (R&D) expenditures.

In 2024, Moore Threads recorded revenues of 438 million yuan but incurred a loss of 1.49 billion yuan, adding to losses of 1.67 billion yuan in 2023 and 1.84 billion yuan in 2022. MetaX, in the same year, reported revenues of 743 million yuan alongside a 1.4 billion yuan loss, following losses of 871 million yuan in 2023 and 777 million yuan in 2022.

According to He Hui, research director on semiconductors at Omdia, these firms are considered leading GPU developers in China, and their ability to access capital markets domestically is deemed "crucial" for sustained R&D efforts. This highlights the substantial investment required to compete in the advanced semiconductor industry, even with government backing and a protective domestic market.

The success of these IPOs will be a key indicator of investor confidence in China's capacity to build a resilient and competitive domestic AI chip industry in the face of ongoing international tech restrictions.