In the ever-evolving landscape of technology investments,few narratives are as compelling as that of Cambrian Innovation (688256.SH),often dubbed the "first AI chip stock." This company has recently witnessed a significant surge in its stock price,which soared to unprecedented heights,raising questions and sparking discussions among industry analysts and investors alike.

On January 10,Cambrian's stock opened strong,reaching a remarkable peak of 777.77 yuan per share during the trading day.This noteworthy performance propelled the company's market capitalization beyond a staggering 310 billion yuan.As the trading session concluded,Cambrian’s stock price settled at 729.97 yuan per share,marking a respectable increase of 2.48% and placing its total market valuation around 304.7 billion yuan.Moreover,the trading volume for Cambrian’s shares was noteworthy,with 94,400 hands traded,accumulating a total transaction amount of 7.035 billion yuan.

The reasons behind Cambrian's meteoric rise are multi-faceted,with opinions divided among market watchers.While the enthusiasm surrounding artificial intelligence has undeniably infused energy into the company’s stock,some analysts believe that the influence of passive index funds has played a crucial role in amplifying the price dynamics.

When compared to Cambrian’s explosive growth in the AI chip sector,other companies focusing on generative models appear to be struggling.One notable example is Baidu Group,which was among the first recipients of the spotlight within this sector,only to find its stock price plummeting by over 33% since the beginning of 2024.

Cambrian was established in 2016 and has devoted considerable time and resources to the AI chip domain.It made a striking entrance into the public market on July 20,2020,with its stock price jumping more than 200% on the first day of trading,reaching a market valuation of 85 billion yuan.However,this euphoric phase was short-lived,as the company’s stock experienced a steep decline in the following months,hitting a record low of 46.59 yuan per share in April 2022.

By the end of 2022,the landscape shifted dramatically with the advent of ChatGPT,igniting a new wave of interest in AI applications.Cambrian,positioned strategically as an AI chip player,benefited from this newfound excitement.From the beginning of 2024 to the present,the company’s stock has skyrocketed by 440.88%,resulting in a market cap increase of over 250 billion yuan.

Today,Cambrian stands as the second highest-valued publicly traded company in the A-share market,trailing only behind Kweichow Moutai.In the Sci-Tech Innovation Board,it ranks third in total market capitalization,following SMIC and Hygon Information.

As Cambrian's stock price ascends,the fortunes of its controlling shareholder,Chen Tian Shi,are also on the rise.According to the 2024 Hurun Rich List,Chen's net worth stands at approximately 32 billion yuan,placing him at the 140th spot and earning him the title of the richest person in Nanchang.Based on the stock price as of December 18,2024,the value of the 11.9 million shares directly held by Chen is estimated to be around 87.3 billion yuan.

The recent spike in Cambrian’s stock price has been attributed to various factors.In addition to the AI narrative driving interest,the growing trend of passive index funds cannot be ignored.In 2024 alone,A-share passive investments have grown rapidly,with exchange-traded funds (ETFs) emerging as a notable segment experiencing expansion.By the end of Q3 2024,the assets in passive index funds had outstripped those in active equity funds for the first time.

This growth trajectory of passive index funds has eventually translated into increased liquidity for index constituent stocks.With Cambrian being a part of several significant indices including the Sci-Tech 50 Index,the CSI 300,the CSI A500 Index,and the Guozheng Chip Index,many passive funds are now holding shares of the company.

According to Wind data,as of the end of September 2024,five of the top ten shareholders of Cambrian are investment funds,including Huaxia Shanghai Stock Exchange Sci-Tech Innovation Board 50 and E Fund Shanghai Stock Exchange Sci-Tech Innovation Board 50.In Q3 2024,these index funds further increased their stakes in Cambrian,with Huatai-PB also entering the list of top ten shareholders.

On November 29,2024,the China Securities Index Company executed regular adjustments to the Shanghai Stock Exchange 50 Index samples,admitting Cambrian into the index.As one of the critical indices in the A-share market,many passive products track this index,with a total size of 163.577 billion yuan as of the adjustment date.Consequently,significant capital inflows are expected to follow Cambrian's inclusion,with estimates from Guosen Securities projecting a net inflow of approximately 3.567 billion yuan.

Further enhancing its position,Cambrian was also considered for inclusion in the FTSE China A50 Index,which would continuously add to the demand for shares should this event materialize.

Sparking from the excitement ignited by ChatGPT at the end of 2022,the global AI sector has been in continuous flux.The AI concept initially stoked fervor in the capital markets,but after two years,a differentiation has emerged.Hardware companies like Cambrian,representing AI chips,remain at the center of this attention,while generative model-focused firms face relative obscurity.

Despite Cambrian not yet achieving profitability,the company showcases a promising array of product innovations.According to research from Debang Securities,in 2023,Cambrian unveiled a new AI chip named Siyuan 590,which directly competes with Nvidia’s flagship A100 model.This AI chip deploys an ASIC architecture that supports almost all major current large models,boasting an overall performance nearing 80% of the A100.

With regards to the profits generated during the current AI boom,those supplying the necessary tools—often referred to as “the sellers of shovels”—have found themselves reaping significant rewards.In Q3 2024,Cambrian reported revenue of 121 million yuan,a remarkable year-on-year growth of 284.59%,despite posting a net loss attributable to shareholders of 194 million yuan.