In the rapidly evolving landscape of the automotive industry, the demand for advanced driving technologies has created a rollercoaster of fortunes for companies like Hezhima Intelligent Technology, known as the "first stock of smart driving chips" in ChinaJust recently, its stock price experienced extreme fluctuations reminiscent of a wild amusement park ride, leaving investors and market analysts alike both bewildered and intrigued.

On February 11, 2024, Hezhima's share price plummeted to 22.35 HKD per share, registering a drop of 4.69%. This decline was startling, especially following a remarkable surge just days earlierFrom February 6 to February 7, the company’s stock skyrocketed by approximately 12%, before witnessing a staggering increase of over 55% during the later part of the trading day on February 7. By close of trading, it still managed a substantial increase of 37.59% over the two days, with an aggregate rise exceeding 50%.

However, this exuberance was abruptly halted by developments on February 10. With a key announcement regarding its smart driving technologies, Hezhima found itself confronting a significant market correctionInitially, its shares plummeted over 50% in early trading, eventually settling at 23.45 HKD per share at the end of the day, a staggering decline of 39.56%.

The market sentiment surrounding Hezhima's stock was closely tied to activities at BYD, one of the world's largest manufacturers of electric vehicles and a pivotal player in the smart driving domainOn February 6, BYD announced its upcoming strategy conference focused on "Equity in Intelligent Driving," which drew tremendous attention to advancements in their high-level driving system, dubbed "Tian Shen Zhi Yan" (Heaven's Eye). Following this announcement, shares of several intelligent driving concept companies surged, with Hezhima leading the pack with over a 37% increase along with similar gains from companies like Horizon Robotics and Saimu Technology.

In an unexpected twist, rumors soon spread the next day that BYD had utilized Hezhima’s automotive-grade autonomous driving computing chips in models under the BYD brand Denza

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Hezhima's official response confirmed the adoption of its chips by BYD, which had commenced volume productionThis news acted as a catalyst for Hezhima's brief surge in value.

Industry experts at the time interpreted BYD’s recognition of Hezhima’s technology as a validation of its products and standing in the marketWith BYD's immense scale and market presence, it was perceived that the seamless integration of Hezhima’s chips would massively boost its business prospects.

Despite this euphoric high, the situation took a dramatic turnEarly on February 10, Hezhima issued a clarification regarding unusual trading activity on February 7. The board announced that their collaboration with several automotive original equipment manufacturers (OEMs), including BYD, was part of their regular business operations, attempting to assuage concerns and stabilize investor confidence.

As further insights into BYD’s technological innovations emerged, the narrative shiftedMarket players began to recognize that Hezhima might only be a regular supplier for BYD rather than a key player in the high-end driving system's primary chip selectionSuch a revelation significantly diminished the perceived value of Hezhima’s stock, prompting a return to rational market behavior.

By the end of the tumultuous trading day on February 10, Hezhima’s share price returned to its prior level of 23.45 HKD, a stark reminder of market volatility and the fleeting nature of investor confidence.

Moreover, Hezhima's financial health raises eyebrowsHaving launched its IPO in August 2023, during a period of rapid market expansion driven by the demand for electric and intelligent vehicles, it was initially celebrated for achieving the title of "first smart driving chip stock." Yet, its financial reports tell a more complex story

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In the first half of 2024, Hezhima reported revenues of only 180 million RMB with a net profit peaking at 1.105 billion RMB, significantly boosted not by operational improvement but rather by adjustments in the fair value of financial instruments issued to investorsEssentially, their reported turnaround was more an accounting quirk than a reflection of genuine business success.

The previous three years saw staggering losses, with net profits stationed at -2.357 billion, -2.754 billion, and -4.855 billion RMB from 2021 to 2023, culminating in almost 10 billion RMB in cumulative lossesAs Hezhima navigates 2024, the question remains whether it can truly achieve profitability amid mounting competition.

The competition itself is daunting, as many domestic and international players are aggressively claiming the smart driving sectorContenders such as Huawei, Baidu, and Horizon Robotics are rapidly advancing in the development of autonomous driving chips, presenting formidable challenges in the Chinese marketOn a global level, titans like Nvidia and Intel leverage their extensive technological know-how and capital investment to assert their dominance in the autonomous driving chip market.

In sum, the pressures from both domestic and international fronts create an intensifying competitive environment that threatens Hezhima's future pathAs it strives to underpin its market presence amid rising expectations and fierce competition, the intelligent driving chip enterprise stands at a crossroads—a moment that will fundamentally shape its evolution in the years to come.

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