China’s AI Stock Boom Cracks as $480 Billion Vanishes from STAR 50

At a glance

• The STAR 50, which tracks major AI and semiconductor companies, fell 40% in less than four months, wiping out an estimated $480 billion in market value.
• China’s broader blue-chip index also dropped about 20% from its June high.
• Retail-favourite robotics maker Unitree has lost about half its value since its August listing. Chipmaker CXMT fell by more than a quarter in the past month, while optical-component suppliers Zhongji Innolight and Eoptolink dropped about 60% from their recent highs.
• Reuters cited lofty valuations, investor concerns about AI demand, tax bills and possible restrictions on Chinese equipment exports as factors in the sell-off. It reported no single trigger.
• Reuters also said AI-related stocks accounted for 42% of China’s equity market value and 57% of trading turnover, citing Goldman Sachs.

Context

The sell-off followed a two-year rally in Chinese technology shares, fuelled in part by government support for the sector and investor hopes that AI and robotics would deliver rapid growth. Some retail investors bought in believing state-backed companies offered a safer bet. Unitree’s listing was reportedly oversubscribed by retail buyers 8,000 times.

The downturn has also renewed scrutiny of China’s build-out of AI computing capacity. Reuters reported in 2025 that many data centres were idle or operating well below capacity, and that authorities were working to address excess computing supply. This points to an existing utilisation problem as it does not establish that empty data centres caused the current stock-market crash.

Why It Matters

The sell-off reaches beyond a handful of technology companies. With AI-related stocks accounting for 42% of Chinese equity-market value and 57% of trading turnover, according to Goldman Sachs figures cited by Reuters, doubts about one investment theme may weigh heavily on the wider market. Retail investors are particularly exposed, including those who believed government backing made these companies a safer bet.

The downturn also complicates China’s effort to channel household savings into its technology industries. Falling prices test confidence in that strategy, although the estimated $480 billion decline represents lost market value and not an equivalent amount of cash withdrawn from companies or spent on failed projects.

What We Think

Ultimately, it is a harsh reminder that cool tech and government support do not guarantee profits, so the real challenge now is whether these companies can actually turn their heavy spending into steady earnings.