Big questions loom as China’s memory chipmakers prepare blockbuster IPOs

FOR YEARS, CXMT was losing money. In 2026, it is preparing for an IPO that some say could make it China’s most valuable listed company.

CXMT, a leading producer of dynamic random-access memory (DRAM), the chips that serve as the working memory for just about every computerised system from smartwatches to data centre servers, aims to raise 29.5 billion yuan (S$5.6 billion) from a listing on Shanghai’s tech-focused Star Market.

Fellow memory chipmaker Yangtze Memory Technologies (YMTC), best-known for making NAND flash—a widely used form of memory for storing data like files and photos on electronic devices—is also moving towards an IPO on the same board.

Their planned listings come amid an industry upswing driven by surging demand from artificial intelligence applications that has spawned a memory chip shortage, sending prices and profits soaring across the sector. The pair are widely viewed as China’s best hopes for establishing a foothold in a market long dominated by South Korean and American companies such as Samsung Electronics, SK Hynix and Micron Technology.

In China, many investors see CXMT and YMTC as central to driving the current bull run in domestic technology stocks, with a shortage-fuelled financial turnaround boosting expectations that their market value could reach into the trillions of yuan. But not everyone is convinced the rally can last, with debate emerging over how to value memory chip stocks in the AI era and whether the traditional boom-and-bust cycle still applies to the industry.

At the same time, the back-to-back IPO plans have also raised liquidity concerns for the Chinese mainland stock market, where semiconductor shares have become the major destination for leveraged money, with analysts warning that the listings could siphon funds away from other technology stocks.

Riding the shortage

An explosive surge in AI computing demand that led to a sustained increase in memory chip prices has provided a windfall to semiconductor manufacturers. For CXMT and YMTC, the upswing follows a decade of heavy capital spending to upgrade their technology, ending a long period of burning cash to finally start earning profits.

And big profits at that. In the first quarter of this year, CXMT reported 33 billion yuan in net profit as revenue more than octupled to 50.8 billion yuan, according to the company’s updated IPO prospectus. That is a U-turn from the same period in 2025, when the company suffered a net loss of 2.8 billion yuan.

CXMT’s performance reflects the current frenzied demand for memory chips globally. The company has benefited from the rapid increase in prices that has come with the AI-driven memory shortage. In the first quarter of 2026, DRAM contract prices nearly doubled from the same period the previous year, a trend that began in the final three months of 2025, according to market researcher TrendForce. The firm forecast that DRAM prices will climb another 58 to 63 per cent in the second quarter of 2026.

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In the fourth quarter of 2025, CXMT had 7.67 per cent of the global DRAM market, making it the fourth-largest DRAM-maker by sales, according to research firm Omdia, which predicted CXMT will take more of the market as it expands production and upgrades its technology at a faster pace. According to its IPO prospectus, CXMT will use a large portion of its IPO proceeds to improve its DRAM technology, with the remaining capital earmarked for production line expansion and technology research.

Meanwhile, YMTC’s first-quarter revenue doubled from 2025 to more than 20 billion yuan, lifting its share of the global NAND flash memory market above 10 per cent, Chinese local media reported.

A question of worth

CXMT’s planned listing has sparked a debate about its valuation, as the shortage has led to a rethink in how investors ought to price memory chip stocks. Based on its fundraising target and the number of new shares it plans to issue, CXMT’s implied IPO valuation would be slightly below 300 billion yuan—a figure some see as understating the company’s earnings potential.

Citing the first-half profit estimate in CXMT’s prospectus—which was 57 billion yuan at the high end—a public fund manager predicted that the company will generate more than 100 billion yuan in annual profit, which could support an IPO valuation well above 300 billion yuan.

At that valuation, CXMT’s market value could rise to between 3 trillion yuan and 4 trillion yuan in the near future as the memory shortage propels an earnings boom that could last through 2028, the fund manager said. If that happens, it would make CXMT China’s most valuable listed firm.

Some cautious investors, however, are sceptical, arguing it is unlikely that CXMT’s blockbuster first-quarter results can be repeated in 2027 and beyond as the industry’s cyclical peak inevitably fades.

The semiconductor industry has historically been highly cyclical and capital intensive, characterised by repeated boom-and-bust cycles. In a recent report, researchers at Shanghai Yunji Private Equity Fund Management put CXMT’s market capitalisation at between 800 billion yuan and 1.2 trillion yuan. That estimate was based on a range of valuation metrics, including the price-to-earnings (PE) ratio and the price-to-book (PB) ratio.

Traditionally, net assets have served as the anchor of market value, and international investment banks have commonly used the PB ratio to value chipmakers.

However, the current semiconductor cycle has led investors to take new approaches to valuation. In a May 18 report on the memory chip market, JPMorgan Chase said that it would stop using the PB ratio-based valuation method that it had employed for decades. Instead, it will take a PE ratio-based approach that it said better reflects a company’s ability to generate cash.

Yunji founder Liang Li said that CXMT’s valuation looks stretched given the cyclical nature of the memory chip industry, and it is being further inflated by Beijing’s drive for semiconductor self-sufficiency, along with the tendency of the mainland stock market to award high premiums to new listings.

Liang said that optimists believe the explosive surge in AI demand has changed the cyclicality of the memory chip industry at a fundamental level, but he pointed out the industry has responded with much more measured expansion in production, at least so far. That makes a supply glut unlikely in the near term, so there is no need to stick with the PB ratio-based valuation method.

Whether CXMT can maintain a high valuation will hinge on its ability to achieve technological and mass production breakthroughs in more advanced products like the third-generation high-bandwidth memory (HBM), the high-performance chips at the heart of AI computing systems, according to an analyst at a major brokerage.

In addition, CXMT’s reliance on imported equipment—particularly the high-tech lithography machines critical for chip manufacturing—leaves it vulnerable to disruptions in the supply chain, the analyst said. That risk ought to be factored into its valuation.

Crowding out

Semiconductor stocks have become the dominant destination for leveraged money in the mainland stock market in 2026, and the back-to-back listing plans of CXMT and YMTC are raising concerns that they could further constrict the flow of capital to other technology stocks.

The sector has attracted 91.8 billion yuan in net margin-financing purchases so far in 2026, overtaking communications gear and consumer electronics. Meanwhile, more traditional sectors like consumer goods and real estate have seen investors steadily pull out their leveraged money.

Private equity analysts warned that CXMT’s 29.5-billion-yuan IPO, combined with the surge in market value after its listing, could leave a lot less investment money available for other technology stocks, which could shed 5 to 10 per cent of their market value while the two companies are in the process of going public.

The situation could get worse because the current rally has been driven almost entirely by technology stocks, a brokerage trader said, in a nod to the idea that with liquidity concentrated in one corner of the market, any squeeze on tech stocks has no outlet for relief. CAIXIN GLOBAL