Source: Heart of the Rock Talks about Investment

Driven by Cambrian, the science and technology ETF is red against the market, how long will the science and technology innovation rise? As the most important constituent stock of the Science and Technology Innovation Board, the trend of Cambrian determines the trend of science and technology.

February 25, 2025, Cambrian (688256. SH) share price broke through the 800 yuan mark intraday, with a total market value of more than 330 billion yuan, becoming the second highest-priced stock in A-shares after Kweichow Moutai. This performance seems to be strong, but in fact there are hidden worries, and there are signs of peaking.

Why did Cambrian's stock price suddenly rise to 800 yuan?

This is the result of policy and emotional resonance. First, there are short-term drivers of policy and sentiment. The rise on the day is directly related to Alibaba Cloud's 100-billion-level AI infrastructure investment plan, and the "National Action Plan for the High-quality Development of Computing Infrastructure" requires domestic computing power to account for more than 50%. The market's optimistic expectations for domestic substitution have been amplified.

Secondly, the characteristics of capital game are significant. The shareholding ratio of public funds soared from 8.71% in the third quarter of 2024 to 19.55%, and the financing balance reached 4.324 billion yuan (3.6 times that of September 2024).

Although the stock price has risen against the market, there has been a serious divergence between the technical and the fundamental. Cambrian will still lose 396-484 million yuan in 2024, with a dynamic price-to-earnings ratio (TTM) of -256 times, and the risk of valuation bubble has reached a critical point.

High valuations are hard to hide the earnings dilemma

Behind Cambrian's high valuation, is there an expectation of a huge improvement in performance? In our view, Cambrian's profitability remains difficult.

First of all, the revenue structure is unbalanced. In the first three quarters of 2024, the revenue was 185 million yuan, a year-on-year increase of 27.09%, but 72% of the revenue relied on the government-led intelligent computing cluster project, and the gross profit margin was only 18.7%. The collection period for government orders has been extended from 180 days to 415 days, and operating cash flow has been negative for three consecutive years.

Second, the chance of a single quarter's earnings. The net profit in the fourth quarter of 2024 was 284 million yuan, mainly from non-recurring gains and losses (such as gains on asset disposal), which was still a loss after deducting non-recurring gains. The market is overly optimistic about the profit expectation in 2025, and the proportion of the company's R&D investment has declined for two consecutive years (down 26% year-on-year in 2023 and 7.27% in the first half of 2024), and the ability to iterate on technology is doubtful.

In addition, Cambrian is experiencing the impact of Nvidia and domestic counterparts. Nvidia launched a special version of the A100/T4 chip for the Chinese market, with a price drop of 30%-40%, directly impacting the Cambrian cloud chip market. Its CUDA ecosystem covers 90% of mainstream frameworks, while Cambrian Neuware is only 15% adaptable, and customer migration costs are high.

Domestic counterparts - Haiguang Information DCU chip adopts CUDA-compatible GPGPU architecture, and its revenue in 2024 is expected to be 8.7-9.5 billion yuan, far exceeding Cambrian; Huawei's Ascend 910 is close to Cambrian's flagship Siyuan 590 in terms of energy efficiency.

The valuation bubble is serious, and the technical picture is at the top

Cambrian's price-to-book ratio is 60 and its price-to-sales ratio is 25 times, much higher than Nvidia (10 times). According to a reasonable valuation, Cambrian must achieve a profit of 5 billion yuan in 2025 to support the current stock price. In Q4 2024, it will only make a profit of 284 million yuan, and it will still lose money after deducting fees.

At the end of the third quarter of 2024, the institutional shareholding ratio reached 64.83%, but the recent Dragon and Tiger list shows that institutions have sold a net of 135 million yuan, and signs of loosening chips are emerging.

At the same time, the Cambrian candlestick chart shows a peak signal. The first is the double-M-head structure. On February 21, the stock price hit 777.77 yuan and then pulled back, and on February 25, it rose to 818.88 yuan and then fell back, forming a typical double-top pattern, and the neckline was near 700 yuan. Secondly, the Bollinger Bands are overbought warning, and the deviation of the stock price after breaking through the upper band (736.68 yuan) is 12%, and the probability of a short-term correction increases.

Secondly, the MACD top divergence. On February 25, the new high of the stock price corresponded to the shortening of the MACD red column, and the gap between the DIFF and DEA lines narrowed, forming a daily level top divergence. And there has been a situation of stagflation in volume. The turnover on February 25 was 8.5 billion yuan, exceeding 8 billion yuan for three consecutive days, but the stock price only rose 1.28%, the net outflow of main funds, and the concentration of chips also declined.

In the future, how will Cambrian and the Science and Technology Innovation Board go, and which sectors are undervalued, you can join the knowledge planet of the heart of the rock [Pandian Finance] to view, and you can also get intraday real-time comments, risk and opportunity reminders, technical analysis and other financial services.

Conclusion

Cambrian's 100 billion market value carnival is essentially the result of the resonance of domestic substitution policy dividends and excess capital liquidity, but its technology commercialization ability has not yet crossed the "valley of death".

Under the dual pressure of NVIDIA's price reduction and the marginal slowdown in the demand for AI computing power, the entire valuation system of the Science and Technology Innovation Board is facing the risk of restructuring. Investors need to be wary of the "market dream rate" trap and return to the main line of earnings certainty in order to maintain their earnings in the cycle of technology bubbles and bursts. $Cambrian-U(SH688256)$$Haiguang Information(SH688041)$$Kechuang 50(SH000688)$