China's STAR50, the Index of Its AI and Chip Champions, Is Down 40% in Under Four Months and Has Lost About $480 Billion in Value

While Wall Street debates whether AI stocks are in a bubble, China has already run the experiment. According to a Reuters analysis published Monday, the STAR50 — the Shanghai index of the country's AI and semiconductor champions — has dropped 40% in less than four months, vaporizing about $480 billion of market value. China's broader blue-chip CSI300 is down about 20% from its June highs, against a roughly 6% drawdown in the Nasdaq from the record it set three weeks ago.

The scale of exposure explains the pain. Goldman Sachs estimates AI stocks account for 42% of China's market capitalization and 57% of turnover across mainland A-shares and Hong Kong H-shares. In a market dominated by retail investors, few portfolios escaped untouched.

The fallen favorites tell the story in single names. Unitree, the robot maker that drew 8,000-times oversubscription from retail buyers at listing, has halved since trading began in August. Chipmaker CXMT has lost more than a quarter of its value in the past month. MetaX Integrated Circuits and Moore Threads, which leapt 700% and 400% respectively on their 2025 market debuts, have halved since July. Optical module makers Zhongji Innolight and Eoptolink are down roughly 60% from their June-July highs, partly on Washington's moves toward banning them from supplying US data centers.

There was no single trigger. Traders cited by Reuters point to high valuations, tax bills and the threat of the US and other nations banning Chinese equipment from data centers. State-backed investors, which had been selling into rallies to cap gains, did not cushion the fall. Even after the crash, the STAR50 trades at about 100 times trailing earnings — down from a peak near 250 — versus about 30 for the Nasdaq 100, leaving some investors braced for more.

The losses are landing on ordinary savers whom Beijing had encouraged into equities to fund the AI boom. Chen Wensheng, a small business owner from Hainan who bought into the rally emboldened by what he saw as official backing for companies like Unitree, is nursing losses alongside friends. "The stock market later evolved into a speculative crazy bull," said Beijing-based fund manager Dong Baozhen. "And now we see the bubble bursting." Hong Hao, chief investment officer at Lotus Asset Management, expects a chill on new listings: "What's happening is now going to put a stop for many of the companies trying to get themselves listed."

The sell-off matters beyond China. It dries up the equity pipeline for Chinese AI chip and robot makers just as they need capital to scale, and it removes the most frothy valuation benchmark the global AI trade had. Asia funds remain overweight China on HSBC's research, but the "slow bull" Beijing wanted has turned into a case study every bubble market is now watching.