Reuters says China’s AI bubble has burst after STAR50 falls 40%

Reuters published an analysis saying China’s AI bubble has already burst. The STAR50 index, which tracks leading AI and semiconductor companies in mainland China, fell 40% from its July peak, erasing $480 billion in market value; the CSI300 declined 20% over the same period. Bloomberg described the STAR50 as the worst-performing major technology index in the world this semester.

According to Bloomberg, global AI hardware sales and a rush of foreign investors into the sector during the previous quarter put further pressure on Chinese stocks. Reuters says there is no clear trigger, although high valuations, taxes and possible Western restrictions on Chinese components are among the cited factors. Goldman Sachs says AI stocks account for 42% of China’s market capitalization and 57% of trading on mainland and Hong Kong exchanges; even after the decline, the STAR50 still trades at about 100 times its earnings over the past 12 months.