Chinese AI Stocks Plunge, STAR50 Falls 40% in Four Months

On October 26, as global tech stocks fluctuated, Chinese stocks related to artificial intelligence and semiconductors have already declined. The STAR50 index, primarily composed of leading AI and semiconductor companies in mainland China, has dropped 40% in less than four months, with a market value evaporating by approximately $480 billion. The CSI 300 index has fallen about 20% from its June peak, interrupting nearly two years of gains. Beijing fund manager Dong Baozhen stated: "The stock market has turned into a speculative frenzy, and now the bubble is bursting." Traders noted that there was no obvious single trigger for the decline; high prices, tax bills, and potential bans on Chinese equipment entering data centers in the U.S. or other countries all played a role. During the same period, the Nasdaq has retreated 6% from its record high three weeks ago.

Goldman Sachs stated that AI stocks account for 42% of China's market value and 57% of the trading volume in mainland A-shares and Hong Kong H-shares. When the robotics company Yushu went public, retail investors oversubscribed by about 8,000 times, but its stock price has fallen by about half since trading began in August; chipmaker Changxin Storage has dropped more than a quarter in the past month. Mu Xi Integrated Circuit and Moore Threads saw their stock prices rise by approximately 700% and 400%, respectively, on their first trading days last year, but have also fallen by about half since July. Optical module companies Zhongji Xuchuang and Guangxun Technology have dropped about 60% from their peaks in June and July, partly due to the U.S. moving towards banning these companies from supplying to U.S. data centers. Hainan investor Chen Wensheng said he bought shares in Yushu due to perceived official support and the involvement of state-owned funds, but he is currently facing losses with friends.

The STAR50 is currently about 100 times its past earnings, having fallen from a peak of nearly 250 times, with investors comparing it to the Nasdaq 100's price-to-earnings ratio of about 30 times. Hong Hao, managing director and chief investment officer of Lotus Asset Management in Hong Kong, said: "The current situation will cause many companies trying to go public to pause." Leo Wang, a partner at Beijing Qianchuang Capital, stated: "Overemphasizing the market capitalization weight of tech companies in major indices will create severe bubbles in certain industries and siphon off funds from others." Wang Zhuo, a partner at Shanghai Zhuozhu Investment Management, said: "Chip manufacturers and AI suppliers will eventually fall into price wars like other Chinese manufacturers." HSBC Research noted that Asian funds have generally been selling over the past three months but remain overweight in China; Goldman Sachs' updated recommendation list this month includes Zhongji Xuchuang and Changxin Storage. The China Securities Regulatory Commission did not immediately respond to inquiries, and Chairman Wu Qing met with market participants earlier this month to hear suggestions for improving the capital market.

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