Two Chinese artificial intelligence (AI) chip startups, Moore Threads and MetaX, are seeking to raise a combined 12 billion yuan (approximately $1.65 billion) in initial public offerings (IPOs). The companies are hoping that U.S. curbs on advanced chip sales to China will boost local demand for their products, according to their recent filings. Beijing-based Moore Threads plans to raise 8 billion yuan, while Shanghai-based MetaX seeks 3.9 billion yuan. Both companies intend to list on Shanghai’s STAR Market, the tech-focused board of the Shanghai Stock Exchange.

These fundraising plans underscore growing efforts by Chinese chipmakers to capitalize on Beijing’s push to develop domestic champions in Graphics Processing Units (GPUs), which are crucial for AI development. Reuters reported last week that Biren Technology, another Chinese AI chipmaker, raised about 1.5 billion yuan in fresh funding and was preparing for a Hong Kong IPO. Developing domestic chip champions has become increasingly urgent for Beijing as the U.S. tightens export restrictions. The latest rules, implemented in April, banned Nvidia’s H20 chips, one of its most popular, from being shipped to China. The U.S. has also imposed restrictions since last year that prevent Chinese AI chip designers from accessing advanced global foundries like Taiwan Semiconductor Manufacturing Co. (TSMC) for producing cutting-edge semiconductors.

Risk and Opportunity: US Restrictions Fueling “Domestic Substitution”

Moore Threads and MetaX both cited U.S. sanctions as a major risk to their development but also emphasized that these restrictions could create significant market opportunities for them. “U.S. restrictions on high-end GPU exports to China are prompting Chinese companies to accelerate domestic substitution processes,” Moore Threads stated. The company was added to the U.S. Entity List in late 2023 and is barred from partnering with TSMC, forcing it to rely on domestic manufacturing capabilities. MetaX noted that “geopolitical pressures are forcing relevant domestic clients to use domestically-produced GPU products, which will help domestic GPU manufacturers establish closer ties with local customers and suppliers.”

The two firms design GPUs to compete with Nvidia products and have reported steep losses over the last three years. These losses were largely attributed to heavy research and development spending required for developing advanced technologies. Moore Threads generated revenue of 438 million yuan in 2024 but posted a loss of 1.49 billion yuan, adding to losses of 1.67 billion yuan in 2023 and 1.84 billion yuan in 2022. MetaX reported 2024 revenue of 743 million yuan against a 1.4 billion yuan loss, following losses of 871 million yuan in 2023 and 777 million yuan in 2022. Their ability to raise significant capital through IPOs becomes critical for continuing their R&D activities and moving towards larger-scale production.

Founders’ Background and the Competitive Landscape within China

Both companies were founded in 2020 by executives who previously worked at major U.S. chip firms, providing them with international knowledge and experience. MetaX was founded by former AMD employees, including Chairman Chen Weiliang, who previously served as the U.S. chipmaker’s global head of GPU product line design. Moore Threads was established by former Nvidia employees, including Chairman Zhang Jianzhong, who previously held the role of general manager for the AI chip giant’s China operations. This background of the founders indicates the level of technical expertise they bring to the Chinese market and their deep familiarity with competing technologies.

The two firms compete with a growing roster of domestic rivals, including Huawei, Cambricon, Hygon, and other startups. This competitive landscape reflects China’s broader push for technological self-sufficiency. It’s crucial for Beijing to achieve a higher level of chip independence, and this will help domestic GPU firms achieve economies of scale, which are critical for generating higher revenue and profits in the long run, as noted by He Hui, research director for semiconductors at Omdia. The ability to scale up production and reduce per-unit costs, thanks to increased demand from the domestic market, will be key to the success of these companies.

Future Outlook: China’s Ambitions for Tech Self-Sufficiency and Global Market Impact

China’s ambition to achieve technological self-sufficiency in chips, particularly in the AI chip sector, is a top strategic priority, fueled by global competition and export restrictions. The IPOs of Moore Threads and MetaX are a central part of this plan, aimed at building a robust and sustainable chip industry within China. The success of these companies will not only reduce China’s reliance on foreign technology but also enhance its capabilities in developing advanced AI, which has widespread applications in civilian, commercial, and defense sectors.

However, the path for these companies is fraught with challenges. The steep losses reported reflect the enormous R&D costs required in this field, as well as the technological gap compared to global leaders like Nvidia. Additionally, U.S. sanctions continue to pose a risk, as they could evolve to further limit access to essential technologies or partners. Despite these risks, Chinese determination and massive investment in the sector, coupled with immense domestic demand, create a unique environment where these companies can potentially thrive. Their success will be a significant indicator of China’s ability to become an independent technological force in the chip sector, with broad implications for the global AI market and the geopolitical dynamics between major technological powers.