Huo Xing Finance reports, according to Reuters on October 26, as global tech stocks fluctuated, Chinese AI and semiconductor-related stocks have declined. The STAR50 Index, dominated by mainland China’s leading AI and semiconductor companies, has fallen 40% in less than four months, erasing approximately $480 billion in market value. The CSI 300 Index has dropped about 20% from its June high, halting a rally that had lasted roughly two years. Beijing-based fund manager Dong Baozhen said: “The stock market later turned into a speculative frenzy, and now the bubble is bursting.” Traders noted there is no single clear trigger for the decline; factors include high valuations, tax liabilities, and the potential for the U.S. or other countries to ban Chinese equipment from entering data centers. During the same period, the Nasdaq has retreated 6% from its three-week high. Goldman Sachs stated that AI stocks account for 42% of China’s market capitalization and 57% of trading volume on mainland A-shares and Hong Kong H-shares. Robot company Unitree saw retail investor demand exceed subscription by approximately 8,000 times at its listing; since trading began in August, its stock price has fallen by about half. Chipmaker CXMT has dropped more than a quarter over the past month. Moxi Integrated Circuits and Moore Threads rose approximately 700% and 400%, respectively, on their first trading day last year but have since declined by about half since July. Optical module companies InnoLight and FiberHome have each fallen about 60% from their June and July highs, partly due to the U.S. moving toward banning these firms from supplying U.S. data centers. Hainan investor Chen Wensheng said he bought Unitree shares believing in official support and the involvement of state-backed funds, and is now suffering losses alongside friends. The STAR50 Index still trades at roughly 100 times its past earnings, down from a peak near 250 times, with investors comparing it to the Nasdaq 100’s P/E ratio of around 30. Hong Hao, Managing Director and Chief Investment Officer at Lotus Asset Management in Hong Kong, said the current situation will cause many companies attempting to go public to pause. Leo Wang, Partner at Qianchuang Capital in Beijing, said overemphasizing the market weight of tech companies in major indices has created severe bubbles in certain sectors and siphoned capital away from others. Wang Zhuo, Partner at Zhuozhu Investment Management in Shanghai, said chip manufacturers and AI suppliers will eventually fall into price wars like other Chinese manufacturers. HSBC Research noted that Asian funds have overall been selling over the past three months but remain overweight in China; Goldman Sachs’ updated recommendation list this month includes InnoLight and CXMT. China’s Securities Regulatory Commission did not immediately respond to Reuters’ inquiry; Chairman Wu Qing met with market participants earlier this month to hear suggestions for improving the capital market.
China's AI and semiconductor stocks plummet sharply; STAR50 index drops 40% in four months
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Summary
Market volatility has swept through China’s AI and semiconductor sectors, with the STAR50 index dropping nearly 40% over four months. The index, which tracks leading AI and chip companies, has seen $480 billion in market value erased. A similar trend affected the CSI 300, which is down 20% from its June peak. Fear and Greed Index readings indicate a shift from speculative euphoria to panic selling. Contributing factors include elevated valuations, impending U.S. data center restrictions, and upcoming tax legislation. IPOs such as Unitree and ChangXin Storage surged at launch but have since lost half their value. Goldman Sachs notes that AI stocks now account for more than half of China’s trading volume in A-shares and H-shares.
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