CHINA AI STOCKS CRASH AFTER SPECULATIVE RALLY
China’s STAR50 index of AI and semiconductor companies has fallen 40 percent from its July peak. The decline erased about 480 billion dollars in market value in less than four months. Reuters reported the AI bubble has already burst.
AI stocks made up 42 percent of China’s market capitalization and 57 percent of trading volume according to Goldman Sachs. The heavy concentration amplified losses for retail investors who dominated the market.
The STAR50 still trades near 100 times trailing earnings after the drop. That is well above the Nasdaq 100 at roughly 30 times. Morgan Stanley expects Chinese stocks could fall another 10 to 15 percent before finding a bottom.
Unitree shares halved after its August IPO was oversubscribed thousands of times by retail buyers. MetaX and Moore Threads each lost about half their value since July after explosive debuts. Optical suppliers fell roughly 60 percent as Washington moved to restrict Chinese equipment in US data centers.
Broader Chinese blue chips entered a bear market with a 20 percent decline from June highs. The Nasdaq is only about 6 percent below its recent record. The episode shows the cost of extreme concentration in one theme.