Cambricon
The chip war has been getting hotter than a deep-fat fryer since US commerce secretary Howard Lutnick said China would be allowed only Nvidia’s H20 chips, which he described as the company’s “fourth best”.
The Chinese appear to have taken the view that the Americans can shove these fourth-best chips right up their Yankee Doodle Dandy, and Nvidia sold precisely zero H20s to China in the second quarter. Nvidia CEO Jensen Huang has warned that export controls will merely galvanise Chinese chipmakers to innovate and improve their product, and he appears to be spot on.
China’s Cambricon Technologies may be tiny compared with Huawei, let alone Nvidia, but revenue growth of 4,300% year on year shows what can happen when the Chinese state steps behind you and gives you a nudge.
With the Trump administration offering zero clarity or security over trading conditions, the need to achieve self-sufficiency with local technology is underlined, and this creates a huge opportunity for the likes of Cambricon.
The company was founded by Chen Tianshi and his brother when their team spun out of China’s main research institute, the Chinese Academy of Science, which remains its second-biggest shareholder.
Its share price has quadrupled in the past year, and it was boosted by an announcement from local AI pioneer DeepSeek that its latest model was designed to work with the next generation of locally made chips. The potential market is huge, and anybody who’s been watching the electric vehicle market will know that when China gets going it can move from laughably behind to out in front in no time.
Meituan
The Middle Kingdom is not just strapping on the boxing gloves internationally, it is also capable of hosting a pretty tidy punch-up in the local market, such as the one developing in the rapid-food delivery market.
Technology company Meituan had been cruising along happily and profitably with about half the market and a margin fat enough to prompt rivals Alibaba and JD to think: “We’ll have some of that.” So they piled into the market with discounts and promotions, and Meituan was forced to follow.
The consumer has been enjoying the delights of having a bubble tea or a latte delivered in less than half-an-hour for the princely sum of 1 yuan, or $0.14, and the hope was that happy customers would get so used to the convenience that they would still use the service when prices reverted to a more economically viable level.
Meanwhile, it’s thin gruel for shareholders, as Meituan announced a 97% drop in its net income despite a 12% rise in revenues, which it blamed on “irrational competition” in the quarter.
This being China, the heavy hand of the state is never far away, and in May and June the regulators hauled in the three companies for six of the best, trousers down, and they were told to cease “disorderly competition”.
Meituan’s share price is down 33% this year, while its local commerce margin, which had averaged about 19% over the past four years, dropped to 5.7%.
It’s expanding into markets such as Saudi Arabia, Qatar and Brazil, but the local market needs to return to form.
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