Stocks tied to artificial intelligence and the semiconductor industry in China have plunged in recent months, erasing a large amount of market value. According to Reuters, the STAR50 index fell roughly 40% over four months, eliminating about $480 billion in market capitalization.
What happened and when
The decline broke a nearly two‑year uptrend that had been supported by earlier Chinese stimulus measures. The broader Chinese blue‑chip index has also fallen around 20% from June peaks. Many of the largest moves occurred in June–August trading.
Drivers of the sell‑off
Market participants say there was no single trigger; several factors contributed to the selling:
- rich valuations — the STAR50’s trailing P/E remained close to 100 after the correction (it had peaked around 250), compared with a roughly 30 P/E for the Nasdaq 100;
- talk of capital‑gains taxation, which may have encouraged investors to exit;
- the threat of U.S. restrictions, especially the possibility of losing data‑centre orders.
Who was hit hardest?
Goldman Sachs data show AI‑related stocks represent about 42% of market capitalization and 57% of trading turnover on China’s A‑ and H‑share markets, meaning losses disproportionately affected a retail‑dominated investor base.
Selected examples of steep falls:
- Unitree shares, which drew an eight‑thousand‑times oversubscription from retail investors at listing, have fallen to about half their price since the start of August trading;
- CXMT, a chipmaker, lost more than a quarter of its value in a month;
- MetaX and Moore Threads — which saw 700% and 400% rallies at debut last year — have both fallen roughly 50% since July;
- Innolight and Eoptolink, makers of optical components, have each dropped about 60% from June–July peaks, amid concerns Washington could cut them off from U.S. data‑centre orders.
Views from market participants
Tung Pao‑zsen, a Beijing fund manager, said the market had devolved into a speculative frenzy and that the bubble was bursting. Lev Vang, a partner at Beijing Csiencsuan Capital, argued that the overweighting of technology firms distorted capital allocation and created a severe bubble in certain sectors while draining resources from others. Hung Hao, investment director at Hong Kong’s Lotus Asset Management, expects the events will delay a number of planned technology IPOs.
Some analysts and institutions, however, see opportunity in the correction. Goldman Sachs’ updated coverage list includes dozens of Chinese AI names, and HSBC notes that Asian funds as a group remain overweight China.
Implications and investor reactions
Chinese authorities had aimed to foster a predictable, slow‑rising market — a so‑called "slow bull" — by curbing leverage and high‑frequency trading to reduce volatility. The recent collapse runs counter to that goal, and many domestic investors are reallocating capital to other sectors or awaiting lower prices before returning.
Source and note
This article is based on reporting by Reuters. It is not investment advice or a recommendation. An AI assistant contributed to preparing this piece; the final content was edited and verified by our journalist.
