World-beating 55,000% surge in India AI stock fuels bubble fears

The meteoric rise of one stock is serving as a warning sign for investors hoping to capitalize on the artificial intelligence boom. RRP Semiconductor Ltd., a relatively unknown company even in India, has seen its shares skyrocket by over 55,000% in the 20 months leading up to December 17. This makes it the top-performing stock worldwide among companies valued at over $1 billion.

This impressive growth occurred despite the company reporting negative revenue in its most recent financial results and having only two full-time employees, according to its latest annual report. Furthermore, its connection to the semiconductor industry boom is questionable, as the company shifted away from real estate in early 2024. The surge was fueled by a combination of online hype, a limited number of freely traded shares, and a growing number of retail investors in India, resulting in 149 consecutive sessions where the stock price hit its daily limit. Both exchange officials and the company itself have issued cautions to investors.

Now, the rally appears to be losing steam, and regulators are paying closer attention. The Securities and Exchange Board of India (SEBI) has launched an investigation into the surge in RRP's shares to determine if any wrongdoing has occurred, according to a source familiar with the matter. The stock, valued at $1.7 billion, has already fallen 6% from its peak on November 7 and has been restricted by the exchange to trading only once per week.

While RRP's performance is unlikely to significantly impact the broader AI rally, which has added trillions of dollars to the value of major global players like Nvidia Corp., it highlights the extreme gains occurring in certain segments of the market, particularly in India. The country's limited number of listed chipmakers has made retail investors eager for any exposure to the global AI boom. Some observers believe this situation underscores the difficulties regulators face in protecting retail investors from speculative bubbles.

Sonam Srivastava, founder of Wryght Research & Capital Pvt., noted that semiconductors are a popular sector, and investors are willing to buy any related stock due to the limited options in India. She added that global concerns about AI valuations, combined with cases like RRP, suggest that investors may become more cautious about investing in these stocks.

Other exchanges and chipmakers in Asia have also begun warning investors about the risks of chasing AI-related trades. In Shanghai, shares of newly listed AI-chip startup Moore Threads Technology Co. fell 13% on December 12 after the company cautioned about trading risks, even though the stock is still up over 500% since its market debut earlier in December. In South Korea, SK Hynix Inc. experienced a share price drop after the country's main exchange raised its risk alert on December 11, following a tripling of the shares' value in 2025.

A spokesperson for BSE Ltd., where RRP is listed, stated that all surveillance actions related to the stock were communicated through market circulars. RRP Electronics, owned by RRP Group founder Rajendra Chodankar, declined to comment on questions from Bloomberg News regarding the stock surge and regulatory actions, citing an ongoing legal appeal.

RRP's transformation began in early 2024 when Chodankar, whose background includes niche products like thermal imaging systems and weapon-drone cameras, reached an agreement to acquire G D Trading and Agencies Ltd. by repaying an 80 million-rupee loan owed to its founders in exchange for equity.

On April 23, the board approved selling shares to Chodankar and others at 12 rupees each, a 40% discount to the market price. This move gave Chodankar 74.5% ownership and reduced the founders' stake to less than 2%. The company also agreed to change its name to RRP Semiconductor.

Two months prior, Chodankar had established RRP Electronics Pvt. to develop an outsourced semiconductor assembly and testing facility in Maharashtra, a connection that may have contributed to the narrative surrounding the listed company and his private venture.

At a September 2024 event for RRP Electronics' new unit in Navi Mumbai, Chodankar stated that India would become a "superhuman." Maharashtra Chief Minister Devendra Fadnavis and cricket legend Sachin Tendulkar were also present, according to YouTube videos posted by RRP.

Prime Minister Narendra Modi's 2021 semiconductor initiative, a 760 billion-rupee incentive program, has attracted $18 billion in announced investments from companies like Micron Technology, Tata Group, Foxconn, and HCL Technologies.

RRP Semiconductor identifies RRP Electronics as a related party due to Chodankar's ownership of both entities, although it does not have any direct ownership stake, according to exchange filings.

Despite this, some investors began to view RRP Semiconductor as a way to invest in the chip boom. This enthusiasm overshadowed the limited trading volume of its stock: approximately 98% of shares are held by Chodankar and a small group of associates, many of whom are also involved in other RRP-linked companies, including RRP Defense, Indian Link Chain Manufacturers, RRP Electronics, and RRP S4E Innovation, according to filings with the BSE and the corporate affairs ministry.

In April of this year, the exchange rescinded its approval for the company's share sale, a decision RRP has appealed in court, with the outcome still pending. In October, the exchange cautioned investors, a year after placing the stock under its strictest surveillance.

The rejection followed a September 2024 reminder from SEBI that the company was prohibited from accessing the securities market because it belonged to the founder group of Shree Vindhya Paper Mills, a company delisted by the BSE in 2017 for non-compliance, resulting in a 10-year market ban.

A source at the BSE stated that the exchange experienced an "internal lapse" in processing the offering and may seek guidance from SEBI on extending the lock-in period on the shares until the appeal is resolved.

A BSE spokesperson said that RRP's original application stated that the firm, its founders, and directors were not barred from accessing the market, and that the exchange's approval was based on this disclosure.

As the stock price surged from 20 rupees in April 2024, Chodankar, the company's largest shareholder, resigned from the board, and the chief financial officer resigned before returning as company secretary. RRP filed a police complaint against a social media influencer for allegedly spreading rumors about its supposed connections to cricketer Tendulkar and to state-allotted land for chipmaking.

In a November 3 exchange filing, the company stated that it has not yet begun any semiconductor manufacturing activities, has not made any applications under government programs, and denies any association with celebrities.

The company's financials offer little reassurance. RRP reported negative revenue of 68.2 million rupees and a net loss of 71.5 million rupees for the quarter ending in September.

The negative revenue is a result of the company reversing sales booked in the three months ending December 2024 from a 4.4 billion-rupee order won in November from Telecrown Infratech Pvt. The order was later canceled due to "contractual disagreements," according to the company, which also clawed back 80 million rupees of revenue in the March quarter.

These weak financials come at a precarious time for the stock. With the hype surrounding AI diminishing and regulatory scrutiny increasing, the risk now lies with investors who bought into the surge, as well as with Chodankar, who controls almost all of the available shares.