Goldman Sachs Raises Cambricon’s Target Price to CNY 2,406, Maintains Buy

Overview

This is a Goldman Sachs earnings commentary on Cambricon (688256.SS). The report finds that the company’s Q1 2026 results significantly exceeded expectations, with a sharp quarter-over-quarter revenue increase and marked improvement in profitability, while inventory and contract liabilities signal a robust order backlog. Against the backdrop of continued expansion of China’s AI infrastructure and accelerating domestic substitution of AI chips, Goldman Sachs maintains a ‘Buy’ rating and raises the 12-month target price to CNY 2,406.

Core views

At the earnings level: Cambricon’s Q1 2026 revenue reached CNY 2.9 billion, up 53% q/q—61% above Goldman Sachs’ prior forecast; EBITDA margin surged from 26% in the previous quarter to 42%, reflecting economies of scale and improvements in product mix. The balance sheet also sends positive signals: inventory stands at CNY 4.5 billion (versus CNY 4.9 billion in the prior quarter), and contract liabilities have soared from CNY 0.6 million in Q4 2025 to CNY 396 million, indicating a full order book. Industry and demand: Goldman Sachs sees dual pillars supporting the sustainability of AI investment in China. On the demand side, AI agents are penetrating enterprise manufacturing, sales, and marketing scenarios, while multi-modal video generation and personal assistants are driving computing power needs at the consumer level. On the supply side, the Chinese government has made clear commitments to domestic AI chips, with super-nodes/large clusters and next-generation AI chips being continuously iterated to meet multi-modal and training requirements. According to IDC data, China’s AI chip shipments grew 47% year-on-year to 4 million units in 2025, with the localization rate rising from 30% in 2024 to 41%; Cambricon is the largest third-party AI chip supplier besides Huawei, T-Head, and Kunlun. Earnings outlook: Based on the strong Q1 2026 performance and an optimistic view of industry conditions, Goldman Sachs has raised its 2026–2030E net profit estimates by 68%/30%/42%/45%/43% respectively, and expects AI chip shipments to surpass 1 million units in 2028 and 2 million units in 2030. As the product mix upgrades, the average selling price (ASP) of AI chips has also been raised. Goldman Sachs anticipates that operating expense ratios will continue to improve as revenue scales. Valuation and consensus: Goldman Sachs’ 2026/27E EBITDA forecasts are 29%/19% higher than Bloomberg consensus, respectively, while revenue forecasts are 61%/55% higher, largely due to more optimistic assumptions about AI investment and domestic substitution. The company’s current stock price corresponds to 2026/27E PEs significantly below its July 2024–present average, leading Goldman Sachs to believe the valuation remains attractive.

Analysis framework

Goldman Sachs employs a combined top-down and bottom-up approach. First, it assesses the sustained trends of AI infrastructure expansion and domestic substitution through industry data such as Chinese cloud providers’ capital expenditures, AI chip shipments, and localization rates. Second, it validates demand strength using the company’s latest quarterly results, inventory, and contract liabilities. It then revises its 2026–2030E revenue and profit forecasts accordingly. Finally, it derives the target price using discounted EV/EBITDA valuation and cross-validates it against the P/E and growth-rate multiples of global and Chinese semiconductor peers.

Methodology notes

• Valuation MethodEV/EBITDA valuation

  Discounted EV/EBITDA Valuation

  Goldman Sachs multiplies a target EV/EBITDA multiple of 43x by the 2030E EBITDA, then discounts it to 2027E at a 12.7% cost of equity, arriving at a CNY 2,406 target price; this multiple is derived from a regression analysis of peer EV/EBITDA ratios and forward-looking fundamentals (EBITDA growth rate, EBITDA margin).

• Industry/Industrial Analysis FrameworkSupply-demand framework

  AI Computing Power Supply-Demand and Localization Analysis

  The report evaluates the attractiveness and growth potential of Cambricon’s market segment across three dimensions: enterprise/consumer AI application demand, government and cloud provider procurement intentions for domestic chips, and the capacity of domestic AI chip suppliers.

• Quantitative/Factor/Portfolio TheoryCAPM Capital Asset Pricing Model

  Capital Asset Pricing Model (CAPM)

  The cost of equity (COE) used in the target price discounting is 12.7%, calculated as the sum of the risk-free rate (3.0%), the market risk premium (6.5%), and beta (1.5); a beta greater than 1 indicates that the stock is more sensitive to overall market fluctuations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Cambricon (688256.SS)

  The report directly covers this stock, which stands to benefit from the expansion of AI computing power and domestic chip localization

  Strengths

  Better-than-expected Q1 results, significantly improved EBITDA margin; robust backlog (sharp rise in contract liabilities); a leading third-party AI chip supplier alongside Huawei, T-Head, and Kunlun; portfolio shifting toward high-end cloud chips

  Weaknesses

  Still relatively small in scale compared to global giants; vulnerable to wafer supply and external conditions

  Comparison

  Compared to global leaders, the current valuation multiple is similar to AMD/NVIDIA; the target price implies a 2030E PE of 36x and a growth-to-PE ratio of 0.7x, lower than the 0.6–1.9x range of China’s semiconductor leaders, suggesting the valuation is not overpriced

  Risks

  Wafer supply constrained by the U.S. Entity List; cloud chip R&D lagging behind schedule; intensifying competition in the cloud chip space

Key data

• Q1 2026 RevenueCNY 2.9 billion53% q/q, 61% above Goldman Sachs’ forecast
• Q1 2026 EBITDA Margin42%A significant jump from 26% in Q4 2025
• Q1 2026 InventoryCNY 4.5 billionCompared to CNY 4.9 billion in Q4 2025
• Q1 2026 Contract LiabilitiesCNY 396 millionUp from CNY 0.6 million in Q4 2025, signaling a strong backlog
• 2026–2030E Net Profit Estimate Increases68%/30%/42%/45%/43%Based on revenue hikes and improving operating expense ratios
• AI Chip Shipment ForecastsOver 1 million units in 2028, over 2 million units in 2030Reflecting product mix upgrades and localization demand
• 2026/2027E EBITDA Forecasts vs. Bloomberg Consensus29%/19% higher, respectivelyRevenue forecasts are 61%/55% higher, respectively
• 12-Month Target PriceCNY 2,406Corresponds to a 102x 2027E PE
• Current Stock Price/Implied UpsideCNY 1,699.96 / 41.5%As of the close on April 30, 2026
• Target EV/EBITDA Multiple43xDown from a previous 69x, reflecting updated peer and fundamental data
• Cost of Equity (COE)/Beta12.7%/1.5With a risk-free rate of 3.0% and a market risk premium of 6.5%
• China’s 2025 AI Chip Shipments/Localization Rate4 million units / 41%Shipments up 47% y/y, localization rate up from 30% in 2024

Impact & implications

Goldman Sachs believes that Cambricon’s near-term results and backlog have validated the robust demand for domestic AI chips, while in the medium to long term the company will benefit from the expansion of China’s AI infrastructure and chip localization. Following the substantial upward revision of its earnings forecasts, the company is still expected to further improve its margins through economies of scale and portfolio optimization. In terms of valuation, the target price corresponds to roughly a 102x 2027E PE, broadly in line with its historical average of 109x since July 2024; relative to global and Chinese semiconductor leaders, the target valuation does not appear overly rich.

Risks

• Risk of constrained wafer supply: Cambricon was added to the U.S. Entity List in December 2022
• Cloud chip R&D falling behind schedule
• Intensified competition in the cloud chip sector