CXMT surges 466% to lead China's onshore market.

      China has a new most valuable publicly listed company, producing the chips found in your phone. CXMT, previously known as ChangXin Memory Technologies, saw its stock soar 466% during its debut in Shanghai on Monday, according to the South China Morning Post. This values the Hefei-based company at 3.28 trillion yuan, or approximately $485 billion.

      The numbers are striking. CXMT set its IPO price at 8.66 yuan per share, opened at 49.50, and peaked at 55.03 throughout the trading day. The firm raised 57.92 billion yuan, approximately $8.6 billion, which could increase to $9.8 billion if the overallotment option is utilized. This marks the largest listing in Asia this year and ranks as the second biggest in Chinese history, following the Agricultural Bank of China's listing in 2010.

      Turnover exceeded 140 billion yuan, a record as no other mainland-listed stock has surpassed 100 billion in a single day. CXMT itself represented nearly 7% of total trading in China's onshore market, as reported by Bloomberg.

      It now surpasses the Industrial and Commercial Bank of China, which is valued at 2.6 trillion yuan. This memory chip manufacturer, just ten years old, is now worth more than the largest bank in the country, with only Tencent listed in Hong Kong being of greater value.

      Why memory chips, and why now?

      CXMT produces DRAM, the primary memory used in smartphones, PCs, and AI servers. This market has been significantly impacted by the demand created by AI advancements, leading to shortages that have affected consumers. Roku recently increased prices by up to 60%, and Google confirmed that the Pixel 11 will be more expensive due to a sixfold increase in RAM costs.

      CXMT represents the domestic solution that Beijing has been seeking. By 2025, it held 7.67% of the global DRAM market. Although this is far behind Samsung, SK Hynix, and Micron, which collectively produce around 90% of the world's supply, the growth potential is considerable. In the first quarter, operating profit reached 35.43 billion yuan, a significant turnaround from a loss of 2.83 billion yuan the previous year. Apple has started testing CXMT’s chips for devices sold in China.

      "I have no doubt the company is going to grow to be a global leader," said Theodore Shou of Yiyi Capital to CNBC. "It can become a global champion in this particular sector."

      A massive first-day surge

      However, this surge is not solely based on the business fundamentals. On the first day of trading, only about 7% of CXMT’s shares were available for trading, as noted by Hargreaves Lansdown’s Anna Macdonald to the BBC. The limited supply encountered an overwhelming demand, with the retail portion being oversubscribed by 212 times, according to Business Insider.

      Investors placed 9.4 million orders totaling 7.07 trillion yuan, roughly ten-fold the order volume of SpaceX’s record-setting listing.

      Significant first-day surges are common in China. For example, Semight Instruments saw an 876% increase in April, MetaX rose 693% in December, and Moore Threads increased by 425%. "Given how rare dedicated memory companies are in the A-share market, I wouldn’t dismiss the possibility of a speculative frenzy in the initial trading days," suggested Ao Fei of Beijing Xinhan Capital.

      In response to the situation, regulators acted cautiously. This month, Beijing’s securities regulator convened with listed companies, brokers, and fund managers due to concerns that the listing might divert funds from other Chinese tech stocks. However, these fears did not materialize on the first trading day, as the Shanghai Composite Index rose 1.2%, according to the Associated Press, amidst a sharp drop in oil prices and global stock gains.

      Divided opinions on valuation

      Analysts have differing opinions, sometimes significantly so. Nomura initiated coverage with a buy rating and set a target price of 116 yuan. They argue CXMT could increase by 1,239% from its IPO price if it gains market share, predicting its global DRAM production share will rise from approximately 10% to 18% by the end of 2028.

      In contrast, Morningstar assessed its fair value at 14.90 yuan, which is less than a third of Monday's closing price. Analyst Jing Jie Yu explained this viewpoint in a Bloomberg report, highlighting that CXMT lacks access to extreme ultraviolet lithography, making advancements in conventional DRAM increasingly challenging. He suggested that the valuation gap will not close until the company overcomes this limitation.

      Shou also expressed concerns regarding the cycle, noting that investors are already starting to sell following the IPO, and he stated that current profit margins “are not sustainable and need to normalize over a cycle.” He added