China's mainland STAR50 index of AI and semiconductor leaders has collapsed 40% in less than four months, erasing roughly $480 billion in market value, Reuters reported on 26 October 2026. The broader blue-chip CSI300 index is also down about 20% from its June peak.
The sell-off has been broad and severe. Shares in robot-maker Unitree, which was 8,000 times oversubscribed by retail buyers at listing, have halved since they started trading in August, and chipmaker CXMT has lost more than a quarter of its value in the past month. 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.
Traders cited lofty valuations, taxes and concerns the United States could ban Chinese equipment from data centres. On 9 October 2026, China issued new guidelines meant to prevent investment bubbles in what it calls "new productive forces," a category that includes AI.
Goldman Sachs puts AI stocks at 42% of market capitalisation and 57% of turnover across mainland A-shares and Hong Kong H-shares. That concentration means losses have spread widely, particularly among retail investors who piled into the sector.
Beijing-based fund manager Dong Baozhen told Reuters the market had degenerated into a speculative frenzy. Fund manager Wang Zhuo told Reuters, "All bubbles inevitably burst."
The sell-off also complicates Beijing's push to steer household savings into stocks that fund its tech ambitions. Hong Hao of Lotus Asset Management warned that many companies could now put their IPO plans on hold.
Businesses that expected repeated funding rounds to cover expanding costs could consequently face difficult choices about hiring, product investment and market expansion. By comparison, US AI stocks have suffered a more modest setback, contributing to a 6% decline in the Nasdaq from a record high reached three weeks ago.
Source : Reuters
