In brief

• Chinese AI and semiconductor stocks on the STAR50 index have fallen about 40% in under four months.
• Roughly $480 billion of market value has been wiped out.
• AI-linked firms make up a large share of China's equity market and trading, which amplifies the sell-off.
• The downturn challenges Beijing's plans for a stable tech-led rally.

A sharp reversal after a summer rally

The STAR50 index, which tracks leading Chinese companies in artificial intelligence and semiconductors, has dropped about 40% over the past four months (У Китаї луснула "бульбашка" штучного інтелекту: $480 млрд випарувалися з ринку – UNIAN) (Bańka AI w Chinach pęka. Spółki technologiczne straciły 480 mld dolarów – Puls Biznesu). Its market value has fallen by roughly $480 billion over the same period (W Chinach bańka AI pęka. Z giełdy wyparowało 480 mld dolarów – Rzeczpospolita). Measured from its July peak, the index has lost 44%.

Valuations stretched by retail buying

Analysts point to stretched valuations as a key cause. According to Goldman Sachs, AI-linked companies account for about 42% of the combined market capitalisation of China's A-share and H-share stocks, and about 57% of trading turnover. Heavy buying by private investors pushed prices higher, but the same concentration now amplifies the decline.

Broader market under pressure

The weakness has spread beyond the tech sector. The CSI 300 index is about 20% below its June high. Many private investors who bought AI shares near the top are now sitting on steep losses, which raises the risk of further forced selling.

Implications for Beijing and global markets

The correction undermines Beijing's hopes of building a steady, broad-based rally around technology, and it makes it harder for AI companies to raise capital. Some analysts warn that a burst bubble in China could also weigh on global equity markets. Investors will be watching whether state support or regulatory signals can stabilise prices in the coming weeks.

Read also

• Wall Street Ends Week Lower as Tech Stocks Drop on China Fears and AI Debt Concerns
• Chip Stocks Hit 16-Year Losing Streak as AI Bubble Concerns Grow