Cambricon's AI Chip Success: Riding the DeepSeek Wave

In the rapidly evolving landscape of artificial intelligence, China's Cambricon Technologies has emerged as a standout performer, leveraging the success of AI startup DeepSeek to achieve remarkable financial results. According to a recent report from DigiTimes, Cambricon reported a staggering revenue of CNY1.111 billion (approximately US$152.3 million) in the first quarter of 2025, marking a year-over-year increase of 4,230%. This breakout performance follows the company's first-ever profitable quarter in Q4 2024, signaling a significant turnaround for the AI chip designer.

The DeepSeek Catalyst

The meteoric rise of DeepSeek, a Chinese AI startup, has played a pivotal role in Cambricon's success. DeepSeek shocked the global AI community in January 2025 by releasing a powerful, low-cost AI model that rivaled offerings from U.S. tech giants like OpenAI, reportedly at a fraction of the development cost. This achievement not only disrupted the AI ecosystem but also highlighted the capabilities of Chinese AI chipmakers like Cambricon, whose hardware supports DeepSeek's advanced models.

Cambricon's chips, particularly those compatible with DeepSeek's 671-billion-parameter model, have positioned the company as a key player in China's AI infrastructure. While nearly 20 Chinese chipmakers have announced compatibility with DeepSeek's distilled model, only a handful—including Cambricon, Huawei, Moore Threads, and Baidu Kunlun—can handle the full-scale version, underscoring Cambricon's technological edge.

Navigating U.S. Sanctions

Cambricon's success comes at a time when U.S. export controls have tightened, particularly targeting Nvidia's AI chip sales to China. The Trump administration's regulations on Nvidia's China-specific H20 chips have created opportunities for domestic players like Cambricon and Huawei to fill the gap. As major Chinese tech firms like Alibaba, Tencent, and ByteDance shift to local suppliers, Cambricon has capitalized on this trend, with its cloud chip business booming.

Posts on X reflect this sentiment, noting that Cambricon's Q1 2025 revenue was driven by a single major customer, likely DeepSeek, and highlighting the company's ability to thrive despite U.S. sanctions. Goldman Sachs has even projected a 76% upside for Cambricon's stock, citing its leadership in China's AI chip market.

Challenges and Competition

Despite its achievements, Cambricon faces challenges. The DigiTimes report notes that while Cambricon's chips support DeepSeek's largest models, many Chinese chipmakers are still focused on smaller, less computationally intensive models, indicating a gap in the sector's overall capabilities. Additionally, Cambricon's reliance on a single customer for most of its revenue poses risks, as diversification will be crucial for sustained growth.

Competition is also heating up. Huawei's Ascend 910B chips, which DeepSeek reportedly uses for its upcoming R2 model, and Baidu's Kunlun chips are vying for market share. Rumors about DeepSeek's R2 model, with 1.2 trillion parameters and 97.3% lower costs than GPT-4, suggest that Chinese AI innovation is accelerating, potentially increasing demand for advanced chips from Cambricon and its rivals.

Looking Ahead

Cambricon's breakout performance in Q1 2025 underscores the growing strength of China's AI ecosystem, with DeepSeek serving as a catalyst for domestic chipmakers. As U.S. sanctions reshape the global AI hardware landscape, Cambricon is well-positioned to benefit from the shift toward local suppliers. However, the company must navigate competitive pressures and diversify its customer base to maintain its momentum.

The success of Cambricon and DeepSeek also raises broader questions about the global AI race. While dethroning Nvidia remains a long shot, as noted in the DigiTimes report, China's ability to innovate under constraints is reshaping perceptions of its technological capabilities. As one X post put it, "China has no choice but to innovate since they are stuck with less powerful chips," and Cambricon's results are a testament to that resilience.

For now, Cambricon's story is one of opportunity and ambition, riding the wave of DeepSeek's disruptive AI models to carve out a significant role in the global AI chip market. As the industry continues to evolve, all eyes will be on whether Cambricon can sustain its growth and help China close the gap with Western AI leaders.

Source: https://www.digitimes.com/news/a20250428PD219/cambricon-ai-chip-deepseek-revenue.html