Goldman prices Cambricon at 40 times 2027 earnings on a US chip rule that is not final

Cambricon, the Shanghai-listed designer of China's closest substitute for Nvidia's▼−3.21% — Nvidia, down 3.21 percent today AI chips, closed at ¥978.9 on November 13, up almost 22% for the week, while Alibaba▼−0.74% — Alibaba, down 0.74 percent today and Tencent lost a combined $74.9 billion of market value ¹. Nothing either side shipped that week explains the split; the timing points to policy.

Goldman Sachs' China strategy note of November 11↗, which no English-language outlet appears to have reported, prices both sides of that split ². Innolight and Eoptolink, whose optical transceivers move data between the servers of the world's AI data centers, trade at 8 times estimated 2027 earnings; Victory Giant, which makes the printed-circuit boards inside those servers, at 7 ². Cambricon, whose MLU accelerators are the domestic alternative, trades at 40 ², and UBS opened coverage at Buy on November 14↗ ³. That is the substitution trade inside China priced at five times the build-out trade that serves the world.

The demand behind the rally is a draft rule, not an order book

Jensen Huang resigned as Nvidia's chief executive on November 12, after revelations of extramarital affairs plunged the company into crisis ⁴. The same day, House Speaker Mike Johnson said there was growing consensus in Congress on limiting chip exports to China, with nine China chip-control bills pending↗ ⁴¹. Separately, the Commerce Department was reported to be preparing a rule barring Chinese AI companies from renting advanced chips through data centers abroad↗, extending existing controls to seven more countries including Singapore and Thailand; it remains under interagency review ⁵.

The rule that feeds Cambricon cuts its customers' compute

Close that rental route and substitution demand lands on Cambricon. Its third-quarter profit rose 148%, and its chips already run models from DeepSeek and Moonshot ⁷; the MLU690 series outperforms Nvidia's China-market H20 on tokens per second, Morgan Stanley▲+0.55% — Morgan Stanley, up 0.55 percent today estimates ⁶. But most of China's AI labs "are still relying on Nvidia's solution", says Alex Yao, co-head of Asia technology, media and telecom research at JPMorgan ⁴, and tighter access will hit every Chinese company with an LLM business, says Morningstar analyst Chelsey Tam ⁴. The rule that feeds the supplier cuts the compute of everyone who would buy from it.

One ticket bets on a rule, the other on estimates holding

Neither ticket is clean. Goldman's▼−0.23% — Goldman, down 0.23 percent today exporter basket, at 11.6 times against 34.5 for the domestic leaders, is priced against modeled earnings growth of 44% a year to 2028 ². Cambricon's 40 times rests on 85% modeled annual growth over the same years ², in a market where MSCI▲+1.02% — MSCI, up 1.02 percent today China, the broad index of Chinese shares, has missed start-of-year earnings expectations nine years running ². Its own quarter shows the constraint: third-quarter revenue of 3.5 billion yuan fell far short of forecasts on a shortage of high-bandwidth memory, and inventory grew by almost as much as the quarter's entire sales ⁷.

The buyer pays before Washington decides

The rule could be announced as soon as this month ⁵. Three things settle the trade from here: the rule's final scope, whether any of the nine pending bills becomes law, and whether the memory shortage eases enough for Cambricon to ship the demand it is being priced for↗ ⁷. Cambricon is doing the real work of closing China's compute gap and may well earn the demand coming its way. At 40 times, the buyer pays for that work before Washington has decided to force the issue ⁷.