CXMT surges 470% in Shanghai debut after $8.6 billion IPO

CXMT's 470% surge in its Shanghai debut catapulted the Chinese memory chipmaker to a $487 billion valuation, challenging Samsung Electronics and SK Hynix in the $80 billion DRAM market.

"The listing validates China's ability to build a world-class memory player from scratch," Bush Chu, an investment director at abrdn, said. "I would not be surprised to see the stock open 500 percent above the offer price."

The stock began trading at 49.50 yuan on the Shanghai Stock Exchange's Star Market, compared with an IPO price of 8.66 yuan. CXMT raised 57.92 billion yuan ($8.6 billion) in Asia's biggest IPO this year, with proceeds earmarked for production expansion and technology upgrades. The company's first-half revenue surged more than sevenfold, according to its prospectus.

CXMT's explosive debut — making it the most valuable company listed in China, overtaking Industrial and Commercial Bank of China — shows how far the state-backed chipmaker has come in challenging the three-way DRAM oligopoly. With only 6.73 percent of shares freely tradable, the small float could amplify price swings in the coming sessions.

CXMT captured 8 percent of global DRAM revenue in the first quarter, up from about 3 percent a year earlier, according to Counterpoint Research. Samsung Electronics held 38 percent, SK Hynix 29 percent and Micron Technology 22 percent. The Chinese chipmaker has gained pricing leverage as the AI boom drives demand, in some cases quoting higher prices than its South Korean rivals, Reuters reported. The company's Q1 revenue jumped 719 percent from a year earlier, a former CXMT senior director told Goldman Sachs in a July 24 conference call. The executive, who previously spent 18 years at Samsung, said CXMT's profitability is improving sharply as AI-driven demand lifts DRAM prices.

CXMT aims to begin mass production of HBM3 and HBM3E memory — the high-bandwidth chips essential for AI training — by 2026, the former executive said. The company also expects a breakthrough in 3D DRAM technology by 2027, which could help bypass export restrictions on extreme ultraviolet lithography equipment. The chipmaker plans to more than double its production capacity by 2030, with new fabrication sites in Hefei, Shanghai and Beijing expected to come online by 2028. A fourth, larger facility will begin contributing after 2028. The expansion is accelerating adoption of domestic semiconductor equipment from suppliers including Naura Technology Group, Advanced Micro-Fabrication Equipment Inc. and ACM Research, according to Goldman Sachs.

At the IPO price, CXMT traded at 2.4 times book value, a 56 percent discount to the average of SK Hynix, Micron and Nanya Technology, Bloomberg Intelligence data shows. The company's market capitalization remains about one-tenth that of SK Hynix, suggesting room for further gains if the company executes on its technology roadmap. However, some investors caution that memory is a cyclical industry with three-to-four-year cycles, and the market may be near a peak. HSBC Qianhai Securities warned last week that the offering could drain liquidity from the broader Chinese market, though past technology listings suggested a rebound could follow.

For investors, CXMT's listing is a direct bet on China's semiconductor self-sufficiency drive. The company's capacity expansion benefits domestic equipment makers Naura, AMEC and ACM Research, which stand to gain from rising capital expenditure regardless of CXMT's individual stock performance. CXMT shares, trading at 49.50 yuan, face limited downside risk from the small float but could see heightened volatility before more shares become tradable.

This article is for informational purposes only and does not constitute investment advice.