Chinese chipmakers become billionaires without turning a profit

[HONG KONG] Shanghai Enflame Technology has fewer than 900 employees, one major customer, and has never turned a profit since the Chinese computer chip manufacturer began in 2018.

That has not stopped founders Zhao Lidong and Zhang Yalin from becoming billionaires as investors hungry for artificial intelligence bets pour money into the firm and overlook multiple hurdles to growth.

Outside of the duo, Tencent is the biggest shareholder and also the company’s biggest client.

Enflame’s shares soared as much as 234 per cent on their first day of trading on Friday (Sep 11) in Shanghai, bringing Zhao and Zhang’s individual fortunes to US$2.5 billion each.

The two co-founders are subject to lengthy lockup periods and have to meet certain targets before they can cash out. 

Enflame did not respond to requests for comment. 

AI-linked wealth

The windfall is another illustration of how initial public offerings have created enormous wealth for a cohort of Chinese executives tied to AI.

The founders of Moore Threads Technology and MetaX Integrated Circuits, two of Enflame’s local competitors, also saw their personal wealth surge after going public while their companies were firmly in the red.

Enflame’s listing was similarly oversubscribed, even as it faces supply chain bottlenecks, competition from global rivals such as Nvidia and geopolitical uncertainties that have led to multiple quarters of losses. 

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Zhao and Zhang worked at Advanced Micro Devices (AMD) before starting Enflame, named after a Chinese mythical character credited with inventing fire.

Zhao spent two decades in Silicon Valley and served as a vice-president at state-backed Tsinghua Unigroup in Beijing, while Zhang rose through AMD’s Shanghai research centre to run its core chip development.

From the beginning, the co-founders sought to avoid direct competition with Nvidia’s general-purpose graphics processing units.

Unlike other Chinese companies, they chose to develop an alternative type of chip designed to operate outside Nvidia’s ecosystem. 

Beneficiaries of data centre boom

Chinese AI hardware companies like Enflame are benefiting from the country’s rapid data centre boom.

A smaller rival to Huawei Technologies and Moore Threads, Enflame’s success is closely tied to Tencent, which is ramping up AI capacity and continues to require massive computing to support WeChat and other services.

The tech giant holds a 20 per cent stake in Enflame and generated nearly 84 per cent of Enflame’s 990 million yuan (US$138 million) in revenue in 2025.

Enflame posted a net loss of 1.16 billion yuan ($160 million) in 2025 as it invested heavily in research and development.

In late 2023, geopolitical tensions forced it to downgrade certain chip designs to maintain access to Taiwan Semiconductor Manufacturing Corporation’s operations.

To generate revenue, the company has leaned heavily on Chinese state-backed computing projects in cities like Wuxi and Qingyang. 

Enflame’s decision to focus on alternative chips is a “high-risk form of strategic independence”, said Paul Triolo, partner and head of technology at DGA.

“The challenge is assessing how Enflame’s strategy works with different customers,” said Triolo.

“It may be good for Tencent and municipal data centres, given resources to port and update software, but less attractive in the open developer market.” BLOOMBERG