Markets

China’s A.I. Stocks Have Lost 40 Percent in Four Months

co-produced by AI27. October 2026, 09:16

The Pudong skyline in Shanghai at night, reflected in the Huangpu River — The Pudong skyline in Shanghai, home of the STAR Market technology board. © krzhck on Unsplash

The first A.I. bubble has burst, and it burst in China: The STAR 50 index, which tracks China’s leading A.I. and chip stocks on Shanghai’s technology board, has fallen nearly 40 percent from its July peak. That has wiped out about $480 billion (roughly €428 billion) in market value in less than four months, Reuters reported. The index closed at 1,315.50 points on Monday.

The Biggest Losers

The darlings of recent months have been hit especially hard:

Unitree: The maker of humanoid robots has lost about half its value since its stock market debut in August.
CXMT: The memory chip maker has fallen more than 25 percent in the past month alone.
MetaX and Moore Threads: The two G.P.U. developers, seen as China’s answer to Nvidia, have also roughly halved since July.
Zhongji Innolight and Eoptolink: The suppliers of optical modules for data centers are trading about 60 percent below their summer highs.

By comparison, the Nasdaq is only about 6 percent below the record high it set three weeks ago. China’s benchmark CSI 300 index has lost about 20 percent since June.

Speculation, Taxes and Export Controls

There is no single trigger. Several factors are being cited:

Valuations: The STAR 50’s price-to-earnings ratio once stood at about 250 and, despite the crash, is still around 100. The Nasdaq 100 trades at about 30.
Regulation: In early October, Beijing issued guidelines aimed at preventing investment bubbles in “new productive forces,” a category that includes A.I. Curbs on leveraged and high-frequency trading added to the pressure.
Export controls: Investors fear the U.S. could ban Chinese-made data center equipment.
Concentration: According to Goldman Sachs, A.I.-related stocks now make up 42 percent of China’s total stock market capitalization and 57 percent of trading volume.

The fund manager Dong Baozhen has openly called it a bursting bubble, saying the market had degenerated into a speculative frenzy. The crash is hitting retail investors who had piled into the sector especially hard. That is a problem for Beijing, which wants households to put more of their savings into the stock market. Hong Hao of Lotus Asset Management warned that many companies could now put their I.P.O. plans on hold.

Buying Opportunity or Warning Sign?

Not everyone is gloomy. According to HSBC Research, Asian funds have recently even increased their exposure to Chinese equities, and William Bratton of BNP Paribas sees a buying opportunity for cautious investors.

The question is whether the crash will remain a Chinese phenomenon. Concerns about an A.I. bubble are growing in the West as well; the International Monetary Fund recently warned of a debt spiral in the A.I. build-out. At the same time, Anthropic is heading toward one of the largest I.P.O.s in history, with a targeted valuation of $1.5 trillion to $2 trillion.