China's AI dragons breathe fire on Nvidia's moat

Advanced Micro Devices

07/09/2026 13:00

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Robyn Mak
HONG KONG, Sept 7 (Reuters Breakingviews) - China's so-called "four little dragons" may become more than a nuisance for Nvidia NVDA.O. Shanghai Enflame Technology 688801.SS, which is raising some $900 million in a Shanghai IPO, reported a 1,475% year-on-year increase in first-quarter sales. That highlights the progress the country's chipmaking upstarts are making against the $5.6 trillion titan. By developing their own software and easing migration from the U.S. company's products, they are steadily eroding its hold on China's $90 billion AI semiconductor market.   
Enflame's debut will follow rivals' — Moore Threads Technology 688795.SS, MetaX Integrated Circuits 688802.SS and Shanghai Biren Technology 6082.HK. Collectively, the quartet plus state-designated national champion Huawei are leading Beijing's efforts to reduce reliance on Nvidia's graphics processing units (GPUs) that are vital to training and deploying frontier AI models. That task has been made more costly by U.S. export controls on high-end semiconductor-making equipment and tools. 
Tapping public markets will help ease some of the funding pressure for Enflame, founded by Zhao Lidong and Zhang Yalin, two former AMD AMD.O employees. The company's net loss widened year-on-year by more than a third to 444 million yuan ($66 million) in the three months to March. But its more crucial support probably comes from having Tencent 0700.HK, a mobile messaging-to-gaming behemoth, as a top customer and its 20% owner.
The eight-year-old upstart has a steep hill to climb: unlike Nvidia and domestic peers that focus on general-purpose GPUs – currently the industry's preferred AI chip – Enflame is betting on specialised and more power-efficient processors. These types ofcustomised silicon are starting to take off, particularly for inference, where trained models process prompts and generate a response. Still, Enflame's strategy shows how the little dragons are tackling Nvidia's twin advantages.
In hardware, Chinese challengers are lasering in on the fast-growing market for inference chips, which does not require as much computing power as those used to train models. And crucially, in software, Enflame is developing its own programming platform to rival Nvidia's dominant CUDA ecosystem, which hosts many apps, frameworks and AI software that have become industry standard. Nvidia has relied on CUDA to lock in customers. Similarly, the $36 billion Moore Threads, founded by former Nvidia executive Zhang Jianzhong, boasts a custom system that helps developers migrate code written using CUDA to its own language. 
That Nvidia's market share in China has fallen from a near monopoly a few years ago to an estimated 55% today underscores China's success in cultivating domestic alternatives in areas outside of training and how the little dragons will keep taking bites out of their U.S. rival. 
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CONTEXT NEWS
Shanghai Enflame Technology drew retail investor orders worth 6,109 times the shares available for its Shanghai initial public offering, according to an exchange filing published on September 2. 
The company is raising 6.1 billion yuan ($908 million) after setting its IPO price at 142.18 yuan per share on August 31. It values the company, which is yet to make a profit, at 61 billion yuan ($9.1 billion), or 61.8 times its 2025 sales.
Enflame specialises in chips used for AI inference, which refers to the process in which a trained model generates responses or outputs. It is one of China's leading AI chip startups, referred to as the "four little dragons". The other three — Moore Threads Technology, MetaX Integrated Circuits and Shanghai Biren Technology — all went public over the last year. 

(Editing by Una Galani; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on MAK/  robyn.mak@thomsonreuters.com))