“WALLET SIZE IS TO BE TESTED”
Despite being unprofitable, Chinese AI firms are pushing ahead with listings because of attractive valuations.
The companies “need more capital because it is a super competitive environment. They need to drive the project with a much quicker speed,” said Joseph Chan, associate director at the centre for innovation and entrepreneurship at the University of Hong Kong.
Listings can also attract talent by allowing employees to monetise share options sooner, he added.
Regulators have also been supporting the listings.
In June, the Shanghai Stock Exchange clarified certain listing rules, outlining how AI large-model companies can use a framework intended for firms with strategic technologies but are not yet profitable.
The wave of Chinese AI IPO activity has raised concerns over whether investor enthusiasm has become disconnected from fundamentals.
Marco Sun, chief financial markets analyst at MUFG (China), highlighted that oversubscriptions are only limited to a handful of listings in the broader equity market.
“If there’s a bubble, maybe it’s only down the road. Right now, it is only inflating, (it’s) not a bubble yet,” he said.
“The rules and also the wallet size is to be tested.”
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