Morgan Stanley Maintains positive rating Rating and RMB1,408 Target on Cambricon
The report cut its 2026 EPS forecast by 3% to reflect weak second-quarter revenue growth, while raising its forecasts for 2027 and 2028.
The report cut its 2026 EPS forecast by 3% to reflect weak second-quarter revenue growth, while raising its forecasts for 2027 and 2028. Its core investment case is based on three factors: Cambricon’s deep ties with major CSP customers, with the MLU590 already widely deployed in SAD workloads; a shift in the domestic supply chain, with production moving to SMIC and yields expected to improve gradually in the second half of 2026; and an aggressive product roadmap, with the next-generation MLU690 expected to launch in the fourth quarter of 2026 and potentially deliver approximately 2.2 times the performance.
Under the base case, revenue is expected to achieve a 99% compound annual growth rate from 2025 through 2028. Morgan Stanley’s three-scenario analysis gives a bull-case target of RMB2,660, corresponding to a CAGR above 130%, and a bear-case target of RMB709, corresponding to a CAGR below 60%.
The firm remains positive on Cambricon’s potential to benefit from the AI infrastructure cycle through its position as a leading domestic AI-chip company, deep CSP relationships and continued MLU product iteration. It cautioned, however, that domestic supply constraints, particularly yield bottlenecks, could weigh on near-term performance.
The report identified Cambricon (688256) as the beneficiary in its positive/negative assessment. Market consensus is 90% positive rating, 10% Equal-weight and 0% cautious rating, indicating broadly strong sentiment. Absolute P/E and P/S multiples are high, but the report said they could be justified by strong growth and the company’s strategic position.
Potential catalysts identified by Morgan Stanley include expansion in CSP capital expenditures, the expected fourth-quarter 2026 launch of the MLU690 with approximately 2.2 times higher performance, favorable momentum behind domestic substitution and government policy support for AI chips.
Under the base case, revenue is expected to achieve a 99% compound annual growth rate from 2025 through 2028. Morgan Stanley’s three-scenario analysis gives a bull-case target of RMB2,660, corresponding to a CAGR above 130%, and a bear-case target of RMB709, corresponding to a CAGR below 60%.
The firm remains positive on Cambricon’s potential to benefit from the AI infrastructure cycle through its position as a leading domestic AI-chip company, deep CSP relationships and continued MLU product iteration. It cautioned, however, that domestic supply constraints, particularly yield bottlenecks, could weigh on near-term performance.
The report identified Cambricon (688256) as the beneficiary in its positive/negative assessment. Market consensus is 90% positive rating, 10% Equal-weight and 0% cautious rating, indicating broadly strong sentiment. Absolute P/E and P/S multiples are high, but the report said they could be justified by strong growth and the company’s strategic position.
Potential catalysts identified by Morgan Stanley include expansion in CSP capital expenditures, the expected fourth-quarter 2026 launch of the MLU690 with approximately 2.2 times higher performance, favorable momentum behind domestic substitution and government policy support for AI chips.