(Yicai) May 7 -- The Shanghai stock exchange has questioned the feasibility of the scheme by Chinese construction equipment leasing firm Zhejiang Huatie Emergency Equipment Science and Technology, which has less than CNY60 million (USD8.3 million) in the bank, to move into the capital-intensive artificial intelligence computing power sector.

Huatie intends to invest CNY1 billion (USD138.6 million) to build an AI computing hub based on graphic processing units, the Hangzhou-based firm said yesterday. Once complete, it will rent out computing power to colleges, scientific research bodies, developers of large language models and autonomous driving technology as well as other clients, it said.

The Shanghai bourse immediately responded with a letter querying Huatie’s decision-making process on major matters. It asked Huatie to disclose details of the AI computing power renting subsidiary it set up last September, including the profit model, main suppliers and clients as well as the pay-back period.

As computing power rental is a capital-intensive business, the bourse also requested Huatie to explain how it will raise the necessary funds, if there are interested investors already in place and the state of these negotiations.

Huatie only had CNY58 million (USD8 million) in the bank as of March 31, according to its latest quarterly financial report. And the firm’s assets-to-liability ratio is over 70 percent.

Huatie has yet to respond to the bourse’s enquiry. But a staff member told Yicai that Huatie’s cash flow mainly comes from daily operations and there is no need to worry about how the new business will be funded.

A number of other companies from a range of different sectors, including printing company Hongbo and seasoning firm Lotus Health Industry Group, have branched into AI computing power recently in order to tap into this burgeoning sector and all of them are experiencing big fluctuations in their stock price.

Printing company Hongbo’s share price soared three-and-a-half-fold between April and June last year, but then after its computing power business began to experience hiccups, the share price started to slide and has now lost around 60 percent of its value since the peak.

Investors should stay calm if listed firms say they are moving into AI computing power as it takes time to know whether the projects will succeed and it is a test of the companies’ operating strengths, an analyst from Minsheng Securities told Yicai.

Firms from unrelated sectors need to be careful when investing in the computing power renting sector, a person in charge of such a project at a non-specialist company said. This is because the computing power sector needs a lot of money and the days of manipulating share prices through exaggerated claims are over.

Huatie’s share price [SHA:603300] closed down 0.4 percent at CNY6.29 (USD0.87) today after gaining 4 percent earlier in the day.

Editors: Tang Shihua, Kim Taylor