By Summer Zhen and Samuel Shen
HONG KONG, July 15 (Reuters) - Chinese investors seeking shares in CXMT's $8.6 billion IPO are betting the Chinese chipmaker's valuation will soar as much as 10-fold after its Shanghai debut on the back of an AI-led upcycle and Beijing's ambition to be technologically self-sufficient.
The share offering by CXMT, or ChangXin Memory Technologies, will be Asia's biggest share sale so far this year. And it comes at a time when Beijing is pushing to be self-reliant in the
semiconductor space amid an intense tech rivalry with the U.S.
Wu Zhou, a fund manager at Shenzhen Deyuan Investment, said he will bid for new CXMT shares, betting that China's top memory chipmaker will one day take market share from global giants like South Korea's Samsung Electronics and SK Hynix.
"CXMT's valuation will likely top 3 trillion yuan ($443.33 billion) after listing ... and could even hit 5 trillion yuan," said Wu, adding that whoever wins the lottery part of the IPO subscription will make money.
That compares with an IPO valuation of 579.18 billion yuan after the company on Tuesday priced its offering at 8.66 yuan a share. The IPO will be open for subscription by retail and institutional investors for just one day on Thursday.
Its listing in Shanghai is set for July 27, according to sources familiar with the matter. They declined to be named publicly because they are not authorised to speak to the media. CXMT, which did not respond to Reuters' requests for comment, has yet to officially disclose its debut schedule.
Wu believes that CXMT, China's biggest maker of dynamic random-access memory (DRAM) chips - used to power smartphones, servers, computers and other electronics - "will become a global giant" after a capacity expansion that rides on an AI-driven super-cycle.
"If you look at Micron, Samsung and SK Hynix, they are all trillion-dollar-class companies despite the recent volatility," said Eddie Tam, chief investment officer at Hong Kong's Central Asset Investments.
CXMT is the world's fourth-largest DRAM maker behind SK Hynix, Samsung Electronics, and Micron.
Tam said CXMT's IPO valuation looks very cheap even with China's two- to four-year lag behind top industry players in DRAM and high-bandwidth memory (HBM) technologies. He expects CXMT's shares to "surge several-fold" on their first day of trading.
INVESTOR FRENZY
Yao Kai, a fund manager at Shanghai Zhuangyan Private Fund Management, said he will also bid for CXMT's shares "to try luck," but is worried that the listing could knock down other tech stocks.
CXMT's public offering, China's biggest by a chipmaker, represents Beijing's latest effort to channel capital into strategic industries crucial to its rivalry with Washington.
The company, which was designated as a Chinese military company by the U.S. Department of Defense under the Biden administration, has said it plans to use the IPO's proceeds to upgrade production lines and technologies.
If an over-allotment option for the IPO is fully exercised, gross proceeds would rise to about 66.6 billion yuan, according to a filing on Tuesday.
"I will surely subscribe for CXMT shares. It's a no-brainer," said Shanghai-based investor Chen Zhi, adding that the chances of winning the shares are slim, as China uses a lottery system to allocate new stock, which is in short supply.
In a statement on Wednesday, CXMT said the IPO price valued the company at over 300 times its 2025 earnings and roughly 5 times its book value.
While some investors wonder whether the semiconductor space has become overbought and if AI spending by hyperscalers can continue at its current pace, others brush aside concerns of lofty valuations, citing booming demand for memory chips.
China's top contract chipmaker, Semiconductor Manufacturing International Corp, was listed in Shanghai in July 2020 and the stock almost halved from its debut price in a bit more than two months.
For now, investors are placing their faith in a strong outlook for CXMT's earnings growth.
CXMT's first-quarter revenue hit 50.8 billion yuan, up 700% from a year earlier, while it recorded a net profit of 25 billion yuan, swinging from a year-earlier loss of 1.6 billion yuan, according to its prospectus.
Fund manager Wu expects CXMT's profit to reach 100 billion yuan this year.
"With the explosive use of driverless cars, robots and AI personal computers, the demand for memory chips will surge," he said.
($1 = 6.7670 Chinese yuan renminbi)
(Reporting by Samuel Shen in Shanghai and Summer Zhen in Hong Kong; Editing by Sumeet Chatterjee and Thomas Derpinghaus)
