China’s capital markets are increasingly supporting the development of emerging technologies, underscored by recent initial public offerings (IPOs) and ongoing reforms. However, experts emphasize the need for a revamped valuation system and patient, long-term capital to ensure sustainable growth in this sector.
This perspective emerged following the IPO subscription results for Enflame Technology, a Shanghai-based artificial intelligence (AI) chipmaker. Priced at 142.18 yuan (approximately $21.18) per share, the offering is expected to raise over 6 billion yuan. The proceeds will be used to advance the development and commercialization of the company’s fifth- and sixth-generation AI chips. Enflame’s upcoming public debut will mark a milestone as it becomes the fourth major Chinese graphics processing unit (GPU) firm to be publicly traded. The other three—Moore Threads, MetaX, and Biren Technology—have each seen their share prices surge more than fourfold on their initial trading days. While the STAR Market in Shanghai hosts listing for all but Biren Technology, which is listed in Hong Kong, these companies have attracted significant market attention.
Over the past eight months, 17 companies raised a combined total of more than 97.5 billion yuan through the STAR Market IPOs. This amount represented nearly 51.3 percent of the total A-share IPO proceeds during the same period, which surged 190 percent year-on-year to exceed 190 billion yuan. Among the 64 pre-profit firms listed on the STAR Market is Enflame Technology, illustrating the platform’s openness to high-growth, high-risk ventures.
Experts highlight that the STAR Market’s listing criteria are well-aligned with frontier sectors, including AI, commercial aviation, biomedicine, and quantum information technology—fields characterized by lengthy investment horizons, substantial capital requirements, and upfront losses. Dong Zhongyun, chief economist at AVIC Securities, noted that the exchange’s framework suits the unique nature of these industries.
According to Zhang Jun, chief economist at China Galaxy Securities, China’s capital markets are rapidly evolving into a more inclusive, adaptive, and globally integrated multilayered system. This development supports the transition from traditional to innovative economic drivers. Zhang further explained that the methodology for valuing technology companies is undergoing transformation, with true industry leaders expected to command premiums based on both security and growth, while companies benefiting only from market hype face contraction in valuations and liquidity.
One major challenge is the absence of a unified standard for valuing technology firms. Yang Chuan, senior research fellow at the Shanghai Institution for Finance and Development, pointed out that differing investor criteria often lead to valuation disparities and volatile stock prices that may not reflect company fundamentals.
Concerns about market behavior were also raised by Zhu Ning, professor at the Shanghai Advanced Institute of Finance. Zhu cautioned that some investors have developed an unwarranted assumption that hard-tech stocks will continuously rise, posing risks of sharp corrections when rapid rallies become unsustainable. This warning is reflected in recent market movements; for instance, Unitree, a leading robotics company, saw its shares decline nearly 36 percent from the peak reached shortly after listing in August. The STAR 50 Index, which tracks top performers, dropped about 9 percent since mid-August, mainly due to weakness in semiconductor stocks.
Despite fluctuations, economists view these as normal market adjustments. Yang Delong of First Seafront Fund described the recent declines in semiconductor, chipmaking, and computing sectors as corrections, emphasizing the underlying investment value stemming from China’s economic restructuring. Meanwhile, Fang Yi, chief strategist at Guotai Haitong Securities, recommended increasing exposure to companies with higher and more stable dividends to balance risk going forward, while maintaining confidence in the long-term prospects of emerging technologies.
Pan Helin, a member of the expert committee for information and communication economy under the Ministry of Industry and Information Technology, underscored the importance of attracting patient capital to sustain innovative industries. He called for enhanced market transparency and improved information symmetry to reduce advantages that fuel speculative short-term trading. Moreover, he stressed that stable policies and a more predictable macroeconomic environment will be essential to fostering investor confidence over the long term.