Chinese tech firms rise in Hong Kong debut as US-China tech race heats up

[SINGAPORE] Three newly listed Chinese technology companies ended higher on Thursday (Jan 8), raising a combined US$1.19 billion, in a boost to Beijing’s quest to compete with US high-tech, and raising the prospect of another busy year for flotations in Hong Kong.

All of the debutants closed above their offer prices. Artificial intelligence company Zhipu AI, also known as Knowledge Atlas Technology, opened 3.3 per cent higher than its offer price of HK$116.20 apiece and ended 13.2 per cent higher at HK$131.50.

Shanghai Iluvatar CoreX, a semiconductor firm, started 31.6 per cent higher than the offer price of HK$144.60, and closed 8.4 per cent higher at HK$156.80.

Surgical robotics company Shenzhen Edge Medical jumped 36.4 per cent above the HK$43.24 offer price, and ended 30.9 per cent higher at HK$56.60.

In total the strong debuts raised HK$9.3 billion (S$1.5 billion).

China fast-tracks AI and chip listings

Chinese authorities are fast-tracking AI and chip listings to strengthen domestic alternatives to advanced US technology, a backdrop that has drawn issuers across the tech sectors. Huawei’s AI server spinoff xFusion has hired Citic Securities in preparation for a mainland IPO, while memory chipmaker ChangXin Memory Technologies and Baidu’s AI chip arm Kunlunxin also plan listings, Reuters has reported.

Zhipu AI, spun out of Tsinghua University, raised HK$4.35 billion at HK$116.20, giving it a valuation near HK$51 billion.

It plans to use the bulk of proceeds for research and development. Cornerstone investors included JSC International Investment Fund and JinYi Capital Multi-Strategy Fund, among others.

Marco Sun, chief financial market analyst at MUFG (China), said the modest gains in IPOs, particularly Zhipu AI, should not be seen as fading enthusiasm for AI.

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“Early-stage investments have yet to be cashed out for profit,” Sun said. “China’s AI story is only beginning to unfold, so it’s too early to draw conclusions.”

Janice Hu, China Country Head, UBS and Chairperson of UBS Securities, said on Wednesday that China’s listed AI and high-tech companies are worth about US$5 trillion versus roughly US$30 trillion in the US, and China has yet to produce a US$1 trillion player. “It’s only a matter of time,” Hu added.

Zhipu AI is a leader in China’s AI quest

Founded in 2019, Zhipu AI has become a leading player in China’s AI push. Last June, OpenAI singled it out as a fast-rising rival, framing the company within Beijing’s push to expand Chinese-developed AI overseas. Zheng Peng, CEO of Zhipu AI, said the firm’s overseas expansion was just “normal business”.

“As a frontrunner in the AI sector, this listing will provide the company with significant capital to fuel its next phase of growth,” said Dan Ouyang, partner at law firm Baker McKenzie, which advised the Zhipu AI IPO’s sole sponsor and underwriters, in a statement on Thursday.

Shanghai Iluvatar CoreX, a designer of general-purpose GPUs, raised HK$3.48 billion. Its offer price gave it a market capitalisation near HK$36.8 billion. It earmarked the bulk of its proceeds for R&D across chips, accelerators and software.

Shenzhen Edge Medical raised about HK$1.12 billion, which will fund its R&D, commercialisation, manufacturing capacity and strategic acquisitions, among others.

Its cornerstone investors include Abu Dhabi Investment Authority, OrbiMed, UBS AM Singapore and Tencent’s Huang River.

The trio’s performance on Thursday will help provide a gauge of whether Hong Kong can extend last year’s IPO resurgence, with US$37.2 billion raised from 115 new listings, the strongest since 2021, according to LSEG data as of Jan 5.

The debut pipeline is growing, with MiniMax Group, another Chinese AI firm, and chipmaker OmniVision Integrated Circuits, due to start trading on Friday. REUTERS