China’s domestic chipmaking industry is gaining momentum as U.S. sanctions on the export of advanced chips to that country accelerate local demand, prompting two of its major players to file for initial public offerings on the Shanghai Stock Exchange’s technology-focused STAR index.

A report in Reuters says Beijing-based Moore Threads Technology Co. Ltd. and Shanghai-headqaurtered MetaX Integrated Circuits Co. Ltd. are seeking to raise a combined 12 billion yuan ($1.65 billion) through their IPOs, according to prospectuses filed Monday. Moore Threads hopes to generate at least 8 billion yuan from the sale, while MetaX is seeking a more modest 3.9 billion yuan.

The development of the domestic chip market has become a major priority for Beijing, as the U.S. government continues to tighten its restrictions of more advanced semiconductors to China. In April, it rolled out new sanctions that prohibit the export of Nvidia Corp.’s H20 graphics processing units to the country. The H20 GPU was specially designed to get around earlier restrictions on exports to China, and was widely used by local artificial intelligence developers such as DeepSeek Ltd., Tencent Holdings Ltd. and Alibaba Group Holdings Ltd.

The U.S. has also made efforts to prevent Chinese chip designers from utilizing the advanced foundries of companies such as Taiwan Semiconductor Manufacturing Co., and from buying chip manufacturing machinery from the Dutch supplier ASML Holding N.V., frustrating efforts to design and build their own advanced chips.

As a result, the Chinese government is pushing for its domestic chip industry to build out its own semiconductor infrastructure, so it can manufacture its own GPUs, which are essential for AI training and inference.

Last week, another Chinese chipmaker, Biren Technology Co. Ltd., raised about 1.5 billion yuan in funding as it prepares for its own IPO on the Hong Kong Stock Exchange.

Moore Threads and MetaX are rivals to Nvidia. Their prospectuses show they have thrown millions of yuan at research and development in an effort to create more sophisticated GPUs that can be manufactured locally, resulting in heavy losses over the last three years. The latter posted revenue of 438 million yuan in 2024, but its R&D expenses resulted in an overall loss of 1.49 billion yuan that year. That said, it does appear to be making some progress. In 2023, it lost 1.67 billion yuan, and in 2022 its losses reached 1.84 billion.

As for MetaX, it generated 743 million yuan in sales in 2024, resulting in a 1.4 billion yuan loss, growing significantly from the 871 million yuan loss it posted in 2023.

The two companies say U.S. sanctions are both a risk and a potential tailwind, because though they could hold up development plans, they could also create substantial market opportunities as China scrambles to keep up with its geopolitical rival in AI.

Moore Threads, which was added to a U.S. government “Entity List” in 2023 that blocks it from accessing TSMC’s foundries, said the restrictions have prompted Chinese firms to “accelerate domestic substitution processes.” Meanwhile, MetaX argues the fact that domestic clients are turning to locally produced GPUs will help it to establish closer ties with customers and suppliers.

The scramble for funding by Chinese chipmakers supports the argument that GPUs have become the new oil in the AI era, Constellation Research Inc. analyst Holger Mueller told SiliconANGLE. When countries are cut off from that oil, they need to find their own source, and that’s exactly what China is up to, he said.

“China is desperately seeking a source of oil that nobody can cut off from it, hence the fundraising efforts of Moore Threads, MetaX and Biren Technology,” the analyst said. “But it’s a big gamble, because as we’ve seen in the past, not all chip startups end up making the grade. The industry will be watching closely to see how China’s homegrown GPUs perform in the next couple of years.”

Omdia analyst He Hui told Reuters that Moore Threads and MetaX are poised to achieve the massive economies of scale needed to become profitable, due to China’s push to attain self-sufficiency in the GPU market. “Moore Threads and MetaX are both considered leading GPU firms in China, and accessing the capital market would be crucial for them to continue their research and development,” Hui said.

One thing in their favor is the expertise of their executive leadership teams, which learned their trade in the U.S.

Moore Threads was founded by a group of former Nvidia employees. For instance, its Chairman Zhang Jianzhong was previously the general manager of Nvidia’s Chinese division. Meanwhile, MetaX is led by former employees of Advanced Micro Devices Inc., the biggest western rival to Nvidia. Chairman Chen Weiliang held the role of global head of GPU product line design at AMD until he quit the company to found MetaX in 2020.

Other Chinese chipmakers of note include Huawei Technologies Co. Ltd., which makes Ascend GPUs, and the publicly traded Cambricon Technologies Co. Ltd. and Hygon Information Technology Co. Ltd.

Image: Moore Threads