China's domestic AI chip industry has just reported a landmark year.
The incredible 2025 performance of companies like Cambricon, Moore Threads, and MetaX didn't happen in a vacuum. A key catalyst was the geopolitical tension with the United States. First, the U.S. government placed restrictions on advanced chipmakers' access to global foundries back in 2023 by adding them to an 'Entity List'. Then, in April 2025, it tightened the screws on NVIDIA's exports to China, creating a sudden supply shock. This effectively walled off Chinese tech giants from their preferred foreign suppliers, forcing them to turn inward and seek domestic alternatives. It was a challenging situation that turned into a golden opportunity for local chip designers.
In response, the Chinese government stepped in with powerful demand-side support. This is the second piece of the puzzle. Local governments in tech hubs like Shanghai and Shenzhen launched initiatives called 'computing power vouchers'. These are essentially subsidies that help companies afford the high cost of renting computing power from data centers. By making it cheaper to use services built on domestic chips, these vouchers directly stimulated real-world orders and helped create a stable, government-backed market for these emerging chipmakers. It wasn't just about building the chips; it was about ensuring someone was there to buy and use them.
The third crucial element was the supply-side push from the capital markets. In late 2025, both Moore Threads and MetaX launched hugely successful Initial Public Offerings (IPOs) on Shanghai's STAR Market, a board designed for tech companies. Their stock prices soared on their debut, injecting them with billions in fresh capital. This funding was critical, as it allowed these still-unprofitable companies to aggressively invest in research, scale up production, and build out their software ecosystems—all necessary steps to compete with established players like NVIDIA.
So, the story of 2025 is a convergence of three powerful forces: an external shock from U.S. sanctions, a demand-pull from Chinese government policy, and a supply-push from enthusiastic capital markets. While Cambricon's shift to profitability is a major milestone, the sky-high valuations of its peers suggest investors are betting heavily on future growth. The road ahead now depends on whether this policy-driven momentum can translate into sustainable, profitable business models.
- Entity List: A list of foreign entities that the U.S. government has determined pose a national security risk. U.S. companies are restricted from exporting goods to entities on this list without a license.
- Computing Power Vouchers: Government subsidies provided to companies, especially small and medium-sized ones, to help cover the cost of renting AI computing resources from data centers, thereby stimulating demand.
- STAR Market: The Shanghai Stock Exchange's Science and Technology Innovation Board, launched in 2019. It is designed to support and fund innovative tech companies in China and has less stringent listing requirements than the main board.