Summary in Plain Language
Recently, the domestic AI chip company Suoyuan Technology is planning to go public (IPO). Many people, seeing Tencent and Xiaomi on the list of shareholders, imagined a scenario where “internet giants are collectively placing orders for the company’s chips, making business easy.” However, the roles of these two companies are quite different: Tencent is a major shareholder that not only invests capital but also purchases chips, while Xiaomi is merely a financial investor participating in the company’s pre-IPO strategic investment, without making any substantial purchase commitments. This analysis highlights a significant shift in the rules of the domestic computing power industry. Previously, companies competed based on how much funding they secured, the high performance of their chips, and the effectiveness of their domestic alternatives. Now, the focus has shifted to practical outcomes—whether they can deliver products on time, satisfy customers, and recoup their investments. Suoyuan has already proven the viability of its products with Tencent’s support, but it still needs to demonstrate that its products can attract other customers without relying on shareholder relationships.
---
Detailed Explanation
1. Don’t be misled by the “dual-giant endorsement”: Tencent and Xiaomi are not on the same level
Many reports mistakenly present Tencent and Xiaomi as Suoyuan’s main supporters. In reality, Tencent is the largest external shareholder, holding 20% of the company’s shares and investing hundreds of millions of yuan annually to purchase Suoyuan’s chips for use in its own AI centers. This makes Tencent a deeply involved partner that provides both funding and orders. Xiaomi, on the other hand, is only buying some shares as part of the IPO strategy, similar to buying discounted shares before the market opens. It is not yet a core shareholder and has not indicated any large-scale purchases. Treating both as Suoyuan’s main customers would fundamentally misinterpret the company’s situation.
2. The valuation of over 60 billion yuan is not based on current profits but on future potential
Suoyuan’s current valuation of around 61 billion yuan would equate to a market value of nearly 10 billion yuan if it were listed. However, the company’s annual revenue last year was less than 1 billion yuan, and it was still in the red. This high valuation is unprecedented in the manufacturing or retail sectors. Investors are betting on Suoyuan’s ability to achieve something that few companies in China can: to develop a product that can be reliably supplied to customers, with comprehensive services including chips, supporting software, server integration, and rapid troubleshooting. Many domestic AI chip companies have promised impressive results in labs, but their products fail in real-world applications. Suoyuan, however, has already overcome this hurdle.
3. 80% of revenue from Tencent is not necessarily a disadvantage; it’s a great opportunity
Some may worry that relying on one customer for 83% of revenue makes the company vulnerable. For a startup AI chip company, having a major customer like Tencent willing to use its products in real scenarios is a huge advantage. Many companies claim to be the best in AI, but their products fail in practical use. Without Tencent’s support, Suoyuan would likely still be struggling to overcome these challenges.
4. The real test for Suoyuan is to find a “second Tencent”
Suoyuan’s success raises the question: Is its success due to being a Tencent-backed project? To prove its competitiveness, Suoyuan needs to secure a major third-party customer with similar purchasing volume to Tencent’s. This is much harder than it seems, as domestic cloud and AI companies are accustomed to using NVIDIA chips. Switching to Suoyuan’s chips would require significant adjustments to their systems and software. Only then will Suoyuan prove its ability to become a market leader.
5. Growing revenue doesn’t mean immediate profitability
Although Suoyuan’s revenue nearly tripled in the first half of 2026, it is still losing money. The AI chip industry is highly capital-intensive. Suoyuan has invested over 3.6 billion yuan in research and development, more than its total revenue in three years. To turn a profit, it needs to attract many new customers and reduce costs. This will only be possible if it can significantly increase its revenue and margin.
---
In summary, while Suoyuan’s progress is significant, it still faces many challenges, including proving its product’s reliability and attracting independent customers. The company’s true success will come when it can demonstrate its competitiveness without relying on shareholder support and secure a stable, long-term customer base.