Enflame, the Chinese competitor of Nvidia in AI chips, goes public

Enflame, Tencent's protégé aiming to compete with Nvidia

Founded in 2018 in Shanghai by former AMD engineers, another giant in AI, Enflame designs chips that power data centers dedicated to training and using AI.

The company relies on a proprietary architecture designed for training and inference of models, and already claims to have commercialized products rather than just prototypes. It mainly complements the quartet known as the "four dragons" of Chinese GPUs, alongside Moore Threads, MetaX, and Biren.

Its main shareholder is significant. Tencent holds just over 20% of the capital and is also its largest customer, accounting for about 84% of the projected revenue for 2025. This proximity is a strength, as Tencent secures Enflame's roadmap through its orders, but it is also the main risk for the company, given its dependence on a single client.

However, its position in the AI chip sector remains modest. Enflame represents less than 2% of chips sold in China. Globally, Nvidia remains an unattainable benchmark. Revenue is growing rapidly (301, 722, then 990 million yuan between 2023 and 2025), but cumulative losses exceed 4.3 billion yuan over three years.

A highly anticipated IPO on the STAR Market

The timeline for Enflame's IPO is now known. The preliminary consultation on the price will begin on August 28, with subscriptions opening on September 2 on the STAR Market in Shanghai, China's equivalent of Nasdaq, and the settlement of allocated shares is scheduled for September 4. The first listing will follow in the days after, on a date yet to be announced. Still in the red, Enflame will be classified in the "Growth" segment of the STAR Market, reserved for tech companies that are not yet profitable.

The company plans to sell about 10% of its capital, or nearly 43 million new shares, to raise around 6 billion yuan (approximately 900 million dollars). The funds will go towards the development of its 5th and 6th generation AI chips and a hardware-software integration project.

If the target is met, the operation would value Enflame at around 60 billion yuan (nearly 8 billion dollars), about three times its last private valuation.

The appetite of the Chinese market for Enflame is hardly in doubt. Its three rivals are already listed, and their debuts have made a significant impact. On the STAR Market, Moore Threads surged by about 425% during its first session, and MetaX by nearly 700%. Listed in Hong Kong, where the rises are more measured, Biren still gained about 76% on its debut day.

Can you invest in Enflame from France?

Unfortunately, no. Enflame will be listed in Shanghai and will therefore have A shares reserved for local investors as well as certain institutional ones. Even once the IPO takes place, Enflame's shares will remain inaccessible to individual French investors.

To gain exposure to the AI theme, it is better to look elsewhere. Among the "four dragons," only Biren is listed in Hong Kong, a stock exchange accessible from France via brokers like Trade Republic, Interactive Brokers, or DEGIRO.

The rest of the AI chip supply chain (memory, storage, infrastructure, or cloud) is also accessible through numerous American and European companies.