China Nvidia rival Cambricon adds to $40 billion rally with 4,000% revenue jump

Chinese semiconductor firm Cambricon posted record profit in the first half of the year underscoring how local challengers to Nvidia are gaining traction as Beijing looks to boost its domestic industry.

Cambricon is among a plethora of companies in China that are vying to be an alternative to American giant Nvidia when it comes to providing the chips required to train and run artificial intelligence applications and models.

In the first half of the year, Cambricon said revenue surged more than 4,000% year-on-year to 2.88 billion Chinese yuan ($402.7 million) and net profit hit a record 1.04 billion yuan. The numbers remain small when compared to Nvidia which reported $44 billion of revenue in its February to April quarter. The tech giant is due to report its fiscal second-quarter earnings later today.

Still, Cambricon's surge in revenue highlights how tech companies in China are searching for potential alternatives to Nvidia, given the continuous threat that they could be cut off from American technology.

Nvidia was blocked earlier this year from selling its pared back H20 chip to China. It has since been allowed to resume exports to China but must share 15% of its revenue from sales to the country with the U.S government.

Meanwhile, China has reportedly been discouraging local firms to buy Nvidia's H20 chips.

Chinese tech giants have been using local chips as well as the Nvidia hardware they have been able to get their hands on, which is helping companies like Cambricon.

Shares of Cambricon have more than doubled this year and it has added north of $40 billion to its market capitalization, according to S&P Capital IQ. The total value of the company is around $80 billion.

Nvidia's strength has not only been in its hardware but also in its software which developers have become accustomed to using. Cambricon said Wednesday that it too is improving its software offering and is working on next-generation hardware.

Nevertheless, China's Nvidia rivals face many obstacles when it comes to beating the competition. Their technology remains far behind that of Nvidia's while the longer term outlook looks even more challenging because of export controls cutting China off from the most advanced chipmaking techniques, blocking advancements in China's domestic AI chip efforts.