(Yicai) Sept. 11 -- Shares of Enflame Technology closed 179 percent higher on their first trading day in Shanghai, with the Tencent Holdings-backed maker of artificial intelligence chips becoming the last of "China's four little graphics processing unit dragons" to go public, following Moore Threads Technology, MetaX Integrated Circuits, and Biren Technology.

Enflame [SHA: 688801] finished at CNY397 (USD59.15) per share on Shanghai's Nasdaq-style Star Market, after earlier surging by as much as 234 percent from its initial public offering price of CNY142.18. Its market capitalization reached CNY170.8 billion (USD25.4 billion).

Enflame plans to raise CNY6 billion (USD894.6 million) through its IPO, with actual fundraising exceeding CNY6.1 billion. According to its prospectus, the proceeds will primarily be used for the research and development and industrialization of fifth- and sixth-generation AI chip series, as well as advanced AI hardware and software collaborative innovation projects.

"Shanghai has formed a complete industrial ecosystem that encompasses chip design, manufacturing, packaging and testing, and end-user applications," Zhao Lidong, chairman of Enflame, said in an interview with Yicai before the company's IPO. "Upstream and downstream firms are highly concentrated, with significant advantages of joint innovation in terms of cost and efficiency."

Shanghai hosts more than 1,200 integrated circuit companies, accounting for about 40 percent of China's industry talent and nearly half of the country's industrial innovation resources.

Established in 2018 in the Lingang Special Area, a testing ground for economic and trade policies within the Shanghai Free Trade Zone, Enflame received comprehensive support from the city's government from the very beginning, including assistance with project establishment, financing, talent support, and customs facilitation. The company quickly found partners across the local supply chain, including chip manufacturing, packaging and testing, and intellectual property development.

Enflame received seed-round investment from a subsidiary of Shanghai State-Owned Capital Investment within less than 10 days of its establishment, an insider at the investment firm told Yicai. In addition, it secured CNY2.7 billion (USD400 million) in a Series E pre-IPO fundraiser in December 2024, co-led by a fund under Shanghai State-Owned Capital Investment and Tencent.

Shanghai State-Owned Capital Investment's decision to invest quickly in the seed round came from its strong confidence in Enflame's chosen technical approach, as well as its recognition of the capabilities of its founder and core team, its investment manager at the time told Yicai.

Enflame has carved out a differentiated technological development path, the ex-investment manager said. Although the approach requires significantly more R&D investment and is technically more difficult, it has formed a core technological moat unique to the company, the person said, adding that the outstanding capabilities of the two founders, along with their complementary strengths, also attracted Shanghai State-Owned Capital Investment's interest.

The rising importance of supply chain security as a national strategic concern also encouraged Shanghai State-Owned Capital Investment's early participation in Enflame, the person stressed. The investment firm aims to empower local chip startups with capital, helping them commercialize and strengthen the domestic AI computing power supply capacity, the person added.

In September 2023, Enflame also secured CNY2 billion in a Series D financing round, led by a fund under Shanghai International Group, another state-owned investment firm.

"From 2023 to 2024, financing across the entire AI chip sector was very challenging," Zhao pointed out, adding that the CNY2 billion round provided a strong boost for Enflame and the entire industry.

2025 marked a "watershed" for the development of China's AI chip industry, Zhao said. Since then, domestic computing power users have started prioritizing Chinese solutions, while industrial collaboration on the supply and demand sides has continued to deepen, gradually reversing the previous passive situation of insufficient demand and limited application scenarios for domestic computing power, Zhao noted.

"The entire supply chain has become clearly aware that upstream and downstream companies must ally to build an independent and controllable industrial ecosystem," Zhao said. The core objective of the collaboration is to create a complete ecological closed loop based on domestic large language models, AI chips, and software platforms, Zhao stressed.

"Since last year, major Chinese internet companies have started to invest real money and resources into joint project development with domestic chip manufacturers," Zhao added.

Enflame will continue to deepen strategic cooperation with various supply chain firms in Shanghai after its IPO, strengthening innovative collaboration with partners in CPU, storage, networking, and models, Zhao said, noting that it aims to help the city achieve full-chain independence and controllability in the intelligent computing power sector, from R&D to application.

Enflame's operating income grew at a compound annual rate of 81 percent from 2023 to last year, according to its prospectus. Its revenue surged 279 percent to CNY1.1 billion in the first half of this year from a year earlier, but the company is yet to turn a profit, with its net loss narrowing just 3.6 percent to CNY632 million (USD94.2 million) in the period.

AI accelerator cards and modules are Enflame's main revenue source, accounting for almost 87 percent of its total income last year. Relevant sales nearly tripled to 64,900 units last year from the previous year, the prospectus showed.

Editors: Tang Shihua, Martin Kadiev