{"id":3332,"date":"2026-10-27T09:03:50","date_gmt":"2026-10-27T04:03:50","guid":{"rendered":"https:\/\/ipp-news.com\/?p=3332"},"modified":"2026-10-27T09:03:50","modified_gmt":"2026-10-27T04:03:50","slug":"in-china-the-ai-bubble-has-already-burst","status":"publish","type":"post","link":"https:\/\/ipp-news.com\/?p=3332","title":{"rendered":"In China, the AI bubble has already burst"},"content":{"rendered":"
\n

While global tech stocks teeter, in China they have already crashed as lofty valuations collapse under worries about AI demand and curbs on Chinese exports.<\/strong><\/p>\n

The meltdown, tanking the mainland STAR50 index of AI and semiconductor leaders \u200bby 40% in less than four months and vaporising some $480 billion in market value, is an ill omen for wobbly world markets and a dampener on China\u2019s efforts \u200cat encouraging its savers to invest in stocks to fund the AI boom.<\/p>\n

It has also slammed the brakes on a rally running two years, since economic stimulus promises sent shares soaring, and has stalled Beijing\u2019s push to break with a long boom-bust pattern and drive a \u201cslow bull\u201d market that delivers reliable performance. China\u2019s broad blue-chip index has dropped about 20% from highs made in June.<\/p>\n

\u201cThe stock market later evolved into a speculative crazy bull,\u201d said Beijing-based fund manager Dong Baozhen. \u201cAnd now we see \u200bthe bubble bursting.\u201d<\/p>\n

The reversal reflects a rally that ran to higher heights than markets in the West or elsewhere in Asia, and compares with a mere prick to US AI stocks, which \u200bhave led a 6% drawdown in the Nasdaq from a record high scaled three weeks ago.<\/p>\n

There has been no obvious selling trigger in China, although \u2060traders said high prices, tax bills and the threat of the US or other nations banning Chinese equipment in data centres all contributed.<\/p>\n

With AI stocks running to 42% of China\u2019s market capitalisation and 57% of \u200bturnover across mainland-listed A-shares and Hong Kong\u2019s H-shares, according to Goldman Sachs, few in a market dominated by small investors have escaped pain.<\/p>\n

<\/a>Retail favourites slide<\/strong><\/h3>\n

Shares in robot-maker Unitree, 8,000 times oversubscribed by retail buyers at \u200blisting, have halved since they started trading in August, and chipmaker CXMT has lost more than a quarter of its value in the past month.<\/p>\n

Chipmakers MetaX Integrated Circuits and Moore Threads Technology, which leapt 700% and 400% respectively on their market debuts last year, have also halved in value since July.<\/p>\n

Chen Wensheng, a small business owner and investor from China\u2019s southern Hainan, said he bought into the rally emboldened by what he felt was official support for the likes of \u200bUnitree, which counted state-backed funds as investors. But Chen and his friends are now nursing losses.<\/p>\n

Frustration that an investment theme backed by Beijing has ended so badly has driven many investors into defensive assets \u200band is likely to slow equity fundraising by tech firms.<\/p>\n

Shares in optical parts makers Zhongji Innolight and Eoptolink Technology are down roughly 60% from highs in June and July, in part as Washington moves towards banning the one-time \u200cdarlings from supplying \u2060US data centres.<\/p>\n

With the STAR50 index still at around 100 times trailing earnings, albeit down from a high of nearly 250, investors compare the Nasdaq 100\u2019s multiple of 30 and worry the selloff could get worse before it gets better.<\/p>\n

\u201cWhat\u2019s happening is now going to put a stop to many of the companies trying to get themselves listed,\u201d said Hong Hao, managing partner and chief investment officer at Lotus Asset Management in Hong Kong.<\/p>\n

<\/a>\u2018All bubbles inevitably burst\u2019<\/strong><\/h3>\n

The frenzy and its fallout<\/a> contrast with a push by authorities to improve returns and dampen volatility by cracking down on leverage and high-frequency trading. State-backed investors were sellers into rallies \u200bto keep gains in check.<\/p>\n

China\u2019s market regulator, the China \u200bSecurities Regulatory Commission, did not immediately reply to \u2060questions faxed by Reuters last week.<\/p>\n

CRSC Chairman Wu Qing met with market participants earlier this month to hear suggestions on improving capital markets, the regulator said on its website, and some in the investment community say the boom has been bad for the market\u2019s structure.<\/p>\n

\u201cOveremphasising the \u2018technology content\u2019 \u2014 that is, the weighting of \u200btech companies by market value in major indexes \u2014 leads to a deviation, even a distortion, in capital behaviour,\u201d said Leo Wang, partner at Beijing-based Qianchuang \u200bCapital.<\/p>\n

\u201cThis created a severe bubble \u2060in certain sectors and a serious drain on others.\u201d<\/p>\n

Some see value in the selloff, saying it is neither surprising nor detrimental to market reforms that are geared for the long term and have gained traction in driving up returns, particularly income, in recent years.<\/p>\n

Although they have been sellers over the past three months, Asia funds in general are overweight on China, according to HSBC research.<\/p>\n

Goldman Sachs has Innolight and CXMT among dozens of Chinese \u2060AI stocks on \u200ba revamped recommendation list it published earlier this month, and BNP Paribas Securities strategist William Bratton has said the market \u200boffers buying opportunities for the careful.<\/p>\n

Still, on the mainland many are looking at other sectors or for even lower valuations before they turn buyers.<\/p>\n

\u201cJust like all other Chinese manufacturers, (chipmakers and AI suppliers) will eventually end up in a price war,\u201d said fund manager Wang \u200bZhuo, partner at Shanghai Zhuozhu Investment Management.<\/p>\n

\u201cThere\u2019s no exception,\u201d he said. \u201cAll bubbles inevitably burst.\u201d<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

While global tech stocks teeter, in China they have already crashed as lofty valuations collapse under worries about AI demand and curbs on Chinese exports. The meltdown, tanking the mainland STAR50 index of AI and semiconductor leaders \u200bby 40% in less than four months and vaporising some $480 billion in market value, is an ill omen for wobbly world markets and a dampener on China\u2019s efforts \u200cat encouraging its savers to invest in stocks to fund the AI boom. It has also slammed the brakes on a rally running two…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-3332","post","type-post","status-publish","format-standard","hentry","category-english"],"gutentor_comment":0,"_links":{"self":[{"href":"https:\/\/ipp-news.com\/index.php?rest_route=\/wp\/v2\/posts\/3332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ipp-news.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ipp-news.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ipp-news.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ipp-news.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3332"}],"version-history":[{"count":0,"href":"https:\/\/ipp-news.com\/index.php?rest_route=\/wp\/v2\/posts\/3332\/revisions"}],"wp:attachment":[{"href":"https:\/\/ipp-news.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ipp-news.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ipp-news.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}