AI: the bubble collapses in China, 480 billion dollars already gone up in smoke

In China, sky-high valuations of technology companies have collapsed, buckling under the weight of concerns about demand for artificial intelligence (AI) and restrictions on Chinese exports.

The Shanghai Stock Exchange's STAR50 index, which brings together leading AI and semiconductor companies in mainland China, plunged 40% in less than four months, resulting in a loss of around $480 billion in market capitalization.

STAR50 Index Collapses 40%, Loses $480 Billion

This fall bodes ill for already shaky global markets and further hampers China's efforts to encourage its savers to invest in the stock market to finance the rise of AI.

It also derailed a two-year stock market rally and put a damper on Beijing's desire to foster a "moderate bull" market offering reliable returns. Mainland China's large-cap CSI 300 index has fallen about 20% from June highs.

This reversal of trend contrasts with what is, for the moment at least, only a slight decline in American stocks linked to AI, the Nasdaq index having fallen 6% compared to its record reached three weeks ago.

American sanctions and doubts about demand: the drivers of the crash

No obvious trigger has been identified for this wave of sales, although operators believe that high prices, the tax burden and the threat of a ban by the United States or other countries on the use of Chinese equipment in data centers have contributed to this situation.

AI-related stocks represent 42% of Chinese market capitalization and 57% of the turnover of A shares listed in mainland China and H shares in Hong Kong, according to Goldman Sachs, and few, in a market dominated by small investors, have escaped the sell-off.

Chinese tech nuggets in freefall The stock of humanoid robot maker Unitree, which made a meteoric IPO last August, has lost half its value since then, while that of chip maker CXMT has seen its value fall by more than a quarter in the last month. MetaX Integrated Circuits and Moore Threads Technology, which jumped 700% and 400% respectively when they went public in 2025, have also seen their value halved since July. Optical components Zhongji Innolight and Eoptolink Technology plunged about 60% from their peaks this summer, due to Washington's threats of an embargo on U.S. data centers.

“The current situation will put a damper on the IPO plans of many companies,” warns Hong Hao, managing partner and chief investment officer at Lotus Asset Management in Hong Kong. China's regulator, the China Securities Regulatory Commission (CSRC), has not yet responded to questions sent by Reuters.

Beijing sees its popular shareholding plan completely derailed

Machine-translated from French