Chips Become the New 'Clicks'! CXMT's Market Cap Surpasses Tencent at $3.54 Trillion, Marking China's Capital Market Shift to Hard Tech

China's DRAM leader ChangXin Memory Technologies (CXMT) reached a market capitalization of approximately RMB 3.54 trillion after Thursday's (13th) close, surpassing Tencent's HK$4.01 trillion (approximately RMB 3.44 trillion) for the first time. Tencent fell 4.46% that day due to surging AI-related capital expenditures and a turn to negative free cash flow, while CXMT saw only a minor 1.2% decline in mainland A-shares.

The shift in market cap leadership stems primarily from two starkly different financial performances. CXMT projected its net profit attributable to parent for the first half of this year to reach between RMB 50 billion and RMB 57 billion, representing over a 22-fold year-on-year increase. In Q1 2024, it reported revenue of RMB 50.8 billion and net profit of RMB 24.76 billion, turning profitable after a RMB 16.3 billion loss in 2023. This leapfrogged it to become the world's fourth-largest DRAM manufacturer, capturing a 7.7% market share—a quarterly increase of 115.1%, far outpacing Samsung, SK Hynix, and Micron. Its Q1 gross margin of 40.99% ranked above Micron and just below SK Hynix.

In contrast, Tencent reported a solid 10% year-on-year revenue growth to RMB 401.2 billion in the first half, with net profit up 10% to RMB 114.1 billion. However, its Q2 net profit of RMB 56 billion grew by only 0.7%, while capital expenditure surged 176% year-on-year to RMB 52.8 billion, pushing its free cash flow into negative territory at RMB -13.8 billion—the first time in recent years.

CXMT went public on the STAR Market on July 27, raising RMB 29.5 billion. From IPO filing to approval took less than five months, with RMB 22 billion directly allocated to equipment procurement, boosting domestic suppliers such as NAURA, AMEC, and Topsky.

CXMT forms a cluster of chip-related stocks alongside Yangtze Memory, SMIC, Cambricon, and OmniVision, covering memory, manufacturing, equipment, AI chips, and CIS. China's DRAM self-sufficiency rate has risen to 26%, and NAND to 43%.

CXMT has already entered the supply chains of Alibaba Cloud, Tencent, ByteDance, Lenovo, and Xiaomi. Notably, Tencent itself holds about a 1.5% stake through Beijing Fengyi—both buying its products and investing in its equity.

Gary Tan, Portfolio Manager at Allspring, said: "Chips are becoming the new 'clicks.'"

Currently, market pricing is pivoting from traffic monetization to core technological autonomy and control. This shift does not signify Tencent's exit but rather represents capital voting for China's industrial upgrade—from soft power at the application layer to hard power at the foundational level.