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  • May 14, 2025

In the rapidly evolving landscape of artificial intelligence (AI), Yuncong Technology, listed on the Shanghai Stock Exchange, has recently made headlines due to its troubling financial outlookThe company has officially announced a forecast indicating continued losses into the fiscal year 2024. Projected net profit attributable to shareholders is expected to be between a daunting -6.8 billion to -5.9 billion yuanFurthermore, their net profit after excluding non-recurring items is expected to span a range of -7.1 billion to -6.2 billion yuanThis unfortunate trend is reminiscent of the company's entire journey since its Initial Public Offering (IPO) in 2022, culminating in a staggering cumulative loss of over 20.21 billion yuan by the third quarter of 2024.

Notably, this latest forecast comes amid a concerning downturn in revenuesReports indicate that revenue for Yuncong Technology plummeted by an alarming 34.51% year-over-year by the third quarter of 2024 compared to 2023. The company has attempted to mitigate its expenses, leading to a noticeable decline in research and development expenditure since 2022. This contrasts sharply with the prevailing industry trend, where peers such as ByteDance, Tencent, Alibaba, and other tech firms have ramped up investment in AI and large model development in response to the growing threat and competition from innovations like ChatGPT.

The situation is further complicated by a significant exodus of talent at Yuncong TechnologyRecently, notable figures within the business have resigned, including the vice president and head of the AI platform, Zhang LingThis departure raises alarms about the tech infrastructure of Yuncong, as only the company's actual controller, Zhou Xi, and vice president Li Jiwei remain among the core technical personnel.

The overarching question that looms over Yuncong Technology is how the company plans to reverse its financial slide amidst core personnel loss and dwindling research investments

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Once heralded as a leader in AI, Yuncong has seen its reputation diminish, struggling to keep pace with industry peers branded as the "AI Four Little Dragons" alongside firms like SenseTime and Megvii.

Despite its initial prominence, the company's status has dwindled amid the AI boomCurrent discussions are now predominantly centered on large models, computational power, algorithms, and the commercialization of AI technologiesAs a result, major players in the sector are hungrily vying for talent, employing aggressive strategies to recruit the brightest minds in AIFor instance, Xiaomi Group made headlines by hiring the brilliant post-95 AI scientist Luo Fuli with a multi-million-dollar salary, igniting fierce market competition.

Amidst efforts from various companies to attract AI talent, Yuncong Technology has shockingly lost two prominent recruitment assets in recent yearsWithin a year following its IPO, key figures like Jiang Xun, who held positions as chief architect and head of the data research institute, left the firmZhang Ling, who joined in 2020, initially found himself at the forefront of the company’s technological endeavorsHowever, with the latest resignation of Zhang Ling as of early 2025, the company is left with a skeletal technical team focused on innovation and development.

Moreover, the simultaneous decline in its research expenditure is alarming for YuncongResearch costs, which stood at a robust 560 million yuan in 2022, saw a reduction to 491 million yuan in 2023, demonstrating a drop of 12.32%. By the three quarters of 2024, these costs further declined to 289 million yuan, marking another 8.08% reduction compared to the prior yearSuch measures echo a broader industry struggle to balance investment against profitability.

In response to these alarming outputs, Yuncong Technology attempts to defend its position by emphasizing the correlation between its revenue downtrend and market environmental shifts, rather than a direct reflection of its R&D investments

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The firm argues that adjustments in business strategy and product line are critical to enhancing operational performance amidst challenging market conditionsThe company is steadfast in its commitment to aligning technological innovation with market demands to sustain business growth.

Despite these reassurances, Yuncong’s financial health continues to paint a worrisome pictureSince its inception, the company has not achieved profitability, concluding the nine months of 2024 with an astonishing -4.236 billion in unallocated profitsCollectively, since its public offering, Yuncong has accrued losses amounting to 20.21 billion yuanOn top of that, the revenue garnered from its IPO in May 2022—approximately 1.728 billion yuan with a net amount of around 1.627 billion yuan after deducting issuance costs—has failed to replenish its increasing debt and operational losses.

As of September 2024, Yuncong's liabilities have surged to a liabilities-to-assets ratio of 49.86%. Furthermore, the company’s cash reserves and trading financial assets have shriveled to below 800 million yuan, starkly contrasted with the short-term loans totaling 367 million yuan that loom ominously on their balance sheets.

Initially priced at 15.37 yuan per share during its IPO, Yuncong's stock saw a decline from its launch day close below its offering price and has since traded around 12 yuan per shareMany investors, such as Shanghai Shangguotou and Zhangjiang Chuangtou, who initially endorsed Yuncong's strategic share allocation, are now facing notable paper lossesNotably, many early shareholders have chosen to offload their shares post-IPO, further demonstrating waning confidence in the company’s future.

In light of these ongoing issues, the management has indicated that it will proactively monitor capital market movements and the company's share price to implement effective market capitalization management strategiesYet, from December 2024 until now, the company's stock price has further dipped by approximately 27%, highlighting the urgent need for corrective actions.

The stark reality of Yuncong Technology’s decline poses an intricate challenge: how can they revitalize operations in the face of plummeting revenues, loss of critical talent, and spiraling financial instability? The burden falls on management to encapsulate innovative strategies that can restore investor confidence while enhancing profit margins

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