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China's AI IPO wave fuels retail frenzy as investors anticipate more listings
🇸🇬 Singapore /Economy & Trade

China's AI IPO wave fuels retail frenzy as investors anticipate more listings

From CNA · () English

Summarized and contextualized by DistantNews.

At a glance

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  • Hundreds of retail investors are gathering in Shanghai to discuss artificial intelligence stocks, despite warnings about a lack of earnings and potential market peaks.
  • Chinese AI firms are pursuing IPOs and secondary listings on mainland and Hong Kong exchanges, with many heavily oversubscribed, driven by government support and attractive valuations.
  • Companies like ChangXin Memory Technologies have seen significant share surges on their debut, with more high-profile AI listings expected, including from major LLM startups.

In Shanghai, informal "stock salons" on Guangdong Road buzz with retail investors exchanging tips, their discussions increasingly focused on artificial intelligence. Despite warnings from regulars about the lack of earnings to support the hype and the risk of losing money if prices crash, confidence remains high for some.

"The government has been supporting the sector, and the premier has also spoken about encouraging foreign investment into the market," said one investor. "The backers (of AI companies) are optimistic, so why shouldn't I be?"

There’s no real earnings to back up all that buzz. Without solid profit, if you buy in at the market peak right before prices crash, you could lose money.

— regular at the street salonA retail investor expresses caution about the current AI stock market frenzy.

This enthusiasm coincides with a wave of AI-related companies listing on mainland and Hong Kong stock exchanges after several sluggish years. Many of these IPOs are heavily oversubscribed, with MetaX Integrated Circuits and Moore Threads seeing retail portions nearly 3,000 times oversubscribed last year. Memory chipmaker ChangXin Memory Technologies (CXMT) surged 466 percent on its Shanghai debut, becoming the mainland's most valuable listed company.

The government has been supporting the sector, and the premier has also spoken about encouraging foreign investment into the market. The backers (of AI companies) are optimistic, so why shouldn't I be?

— investorAnother investor explains their confidence in AI investments, citing government support and optimism from company backers.

More prominent listings are anticipated, including from China's "AI tigers" – six leading AI large language model (LLM) startups. Zhipu AI plans a US$2.2 billion secondary listing in Shanghai, while MiniMax Group is exploring a dual listing. Moonshot AI, developer of the Kimi K3 model, is also reportedly considering a Hong Kong listing.

Despite being unprofitable, Chinese AI firms are pushing ahead with listings, attracted by high valuations and the need for capital to compete in a fast-paced environment. "The companies need more capital because it is a super competitive environment. They need to drive the project with a much quicker speed," explained Joseph Chan, associate director at the University of Hong Kong's centre for innovation and entrepreneurship. Listings also help attract talent by offering monetizable share options. Regulators are reportedly supportive of these market entries.

The companies need more capital because it is a super competitive environment. They need to drive the project with a much quicker speed.

— Joseph ChanJoseph Chan, associate director at the centre for innovation and entrepreneurship at the University of Hong Kong, explains the need for capital among Chinese AI firms.
DistantNews Editorial

Originally published by CNA. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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