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China's AI Stocks: Bubble Bursts, Wiping Out Billions
27 Oct
Summary
- STAR50 index of AI and semiconductor leaders dropped 40% in under four months.
- Some $480 billion in market value has been vaporized from Chinese tech stocks.
- Retail favorites like Unitree have seen shares halved since their August listing.
Global tech stocks are faltering, but China's have already crashed as inflated valuations collapse due to concerns over AI demand and export restrictions. The STAR50 index, tracking AI and semiconductor leaders, has plunged 40% in less than four months, wiping out approximately $480 billion in market value.
This significant downturn has halted a two-year rally and stalled Beijing's efforts to foster a stable, long-term "slow bull" market. The broad blue-chip index has seen a roughly 20% drop from its June highs. Market participants describe the previous period as a "speculative crazy bull" now experiencing a bubble burst.
Retail investor favorites have been hit hard, with robot-maker Unitree's shares halving since their August debut. Chipmaker CXMT has lost over a quarter of its value in the past month, and others that saw massive gains upon listing have also halved.
Concerns persist as the STAR50 index still trades at roughly 100 times trailing earnings, far exceeding the Nasdaq 100's multiple. This valuation gap fuels worries that the selloff may worsen, potentially deterring new listings and impacting the market's structure.
