The rise of Cambrian Biopharma has left many astonished, as the company’s stock price has surged to unprecedented heightsDuring trading, it saw an impressive increase of over 9%, nearing 800 RMB with a historic peak of 777.77 RMB per shareThis meteoric rise has propelled its market capitalization beyond 300 billion RMB, peaking at approximately 324.3 billion RMB, making it the largest chip manufacturer on the A-share market in terms of circulating market value—a position only surpassed by the likes of SMIC and Haiguang Information.

However, this phenomenon invites scrutinyIs Cambrian merely riding a wave of speculative momentum, or does it possess genuine potential? Such questions have pervaded the investment discourse, especially considering its revenue for 2023 stood at 710 million RMB, alongside a non-GAAP net loss of approximately 1.04 billion RMBPredictions for the first three quarters of 2024 show a year-on-year revenue growth of just 27%, potentially culminating in merely 900 million RMB for the year, against substantial losses that are projected to reach around 900 million RMB as well

The disparity between such revenue figures and a market valuation exceeding 300 billion RMB raises eyebrows; Cambrian's price-to-sales ratio hovers well over 300, which is almost unheard of in the market.

This trading phenomenon has drawn attention, with many curious as to who is driving Cambrian's stock price skywardIntriguingly, the number of shareholders has decreased from 33,200 at the beginning of the year to just 26,500 by the third quarter—translating to a significant dip of 20%. Most of this price surge coincided with an optimistic rally post-September 2024, which signals an impending reduction in shareholder numbers further down the line.

What this hints at is a consolidation of shares into fewer hands, primarily among institutional investorsBy early 2024, Cambrian had 537 institutional shareholders, rising to 743 by mid-year, but later dropping back to 306 by September

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Even though this reflects a downtrend, the increase from only 68 institutions a year prior indicates a swelling of confidence among professional entities in Cambrian's futureWith so many seasoned investors seemingly convinced of Cambrian's potential, the legitimacy of their optimism cannot be dismissed as mere coincidence.

In a global context, it's important to recognize that AI chips represent a coveted frontier in technology, with American titans like Nvidia set as the benchmarkNvidia, at one time, boasted a market capitalization nearing 4 trillion dollars—an extraordinary feat—where investors have begun likening Cambrian to the “Nvidia of China.” Such a moniker carries significant implications for valuationIn a country vying to make strides in the tech arena, attributes of valuation must shift in this light.

Recently, a new voice has emerged in the valuation debate, suggesting a novel approach—using the "market-to-research" ratio, or market capitalization divided by research and development investments

This approach diverges from traditional metrics like earnings per share or price-to-earnings ratios, leading to a fresh perspective on Cambrian's value proposition.

To vividly illustrate this, Nvidia's research expenditure for the first three quarters of 2024 reach 9.2 billion dollars, boasting an impressive year-on-year increase of nearly 50%. With projected annual research inputs nearing 12.9 billion dollars, Nvidia’s massive valuation ratio of 264 times its R&D spend brings a fresh lens through which to evaluate CambrianWith reported R&D costs of 660 million RMB in 2024, and anticipated expenditure of around 1.02 billion RMB for the year, Cambrian’s market-to-research ratio hovers near 293, closely paralleling Nvidia's valuations.

Yet, while these metrics might appear to validate Cambrian's valuation, the fundamental question remains—does this financial posture translate into tangible earnings? Nvidia, despite its lofty market-to-research ratio, successfully converts its research into revenue, with a rolling P/E ratio measured at a relatively stable 54. For context, Nvidia is poised to realize net profits exceeding 90 billion dollars for 2024—an achievement mainstream investors can rally behind.

Alternatively, Cambrian's current market cap seems more of a predestination, potentially overleveraged against its forthcoming performance, particularly if it continues to post losses

Assuming a market value of 300 billion RMB, a P/E ratio of 100 would require Cambrian to generate a net profit upward of 30 billion RMB to be sustainable, while a more conservative 50 P/E ratio would demand profits nearing 60 billionThis inevitably leads to questions about what revenues could realistically support such profits.

The investor landscape is complex, with even professional investors at times misjudging market directionsPast trends illustrate how institutional allegiance to stocks such as Kweichow Moutai didn’t shield it from significant declines, with drops of up to 50% when market conditions changedSimilarly, heavy institutional backing for the renewable energy sector suffered brutal downturns, with many stocks dropping well over 50%. Such patterns serve as reminders of the ever-fluctuating ground underlying the A-share market, where even the most promising sectors can quickly spiral.

Now, as Cambrian pushes through its significant rally, the potential for a correction raises eyebrows

The extraordinary journey of Cambrian from a low of 46.59 RMB per share in April 2022 to a high of 777.77 RMB symbolizes impressive growth—over 10 times in value, an increase of more than an astounding 15,694%. Yet, investing with an eye on the future may expose investors to inherent risks, as market sentiments are ever-fluctuating.

The principal beneficiary of this ambitious ascent remains the founder and chairman, Chen TianshiThis post-1985 entrepreneur holds a major stake of 28.63% in Cambrian, further supplemented by an indirect stake through Beijing Aixie Technology Center of at least 0.05%. Collectively, this places his holdings at approximately 28.68%. With Cambrian’s market valuation standing around 320 billion RMB, Chen's assets surge to an impressive 91.8 billion RMB—nearly reaching the billion marks.

The latest listings of China’s wealthiest individuals as per the Hurun Report place Chen Tianshi around the 30th rank, aligning his fortune closely with other titans such as Terry Gou