China’s AI and semiconductor stock boom has turned into a sharp crash, wiping about $480 billion in market value and sending the STAR50 index down 40% in under four months. The reversal has interrupted a two-year rally and weakened Beijing’s effort to build a steadier “slow bull” market; China’s main blue-chip index has fallen roughly 20% from its June peak. AI shares had grown to 42% of market capitalization and 57% of trading in mainland and Hong Kong-listed Chinese stocks, leaving many small investors exposed. The downturn reflects stretched valuations, doubts about AI demand, tax pressures and the risk that the United States or other countries will restrict Chinese equipment in data centers.
Retail favorites have been hit hard: robot-maker Unitree has lost half its value since its August listing, chipmaker CXMT has fallen more than a quarter in a month, and several semiconductor firms that surged at IPO have also halved. Optical-component makers have dropped around 60% from summer highs amid possible US supply bans. Even after the selloff, the STAR50 trades at about 100 times trailing earnings, compared with 30 for the Nasdaq 100, raising concern that prices may fall further and discouraging companies from listing. Some investors see selective opportunities, but others expect manufacturers to face price wars and are waiting for cheaper valuations. The boom also intensified concerns that an excessive focus on technology distorted investment and drained capital from other sectors.
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