China's AI Stock Slump Erases $480 Billion as State Funds Step In

China's market for artificial intelligence stocks has dropped sharply, with the STAR50 index of technology and chip leaders down about 40% from its July high, according to reports by Geo News and UkrMedia News. The fall has erased roughly $480 billion in market value and has raised doubts about whether Chinese tech firms can keep raising money through stock listings.

Bloomberg data cited by Geo News shows state-backed investors have started buying heavily to calm the market. Beijing's earlier hopes for a steady, slow-rising market are now in question.

The key numbers behind the selloff

• 40%: The STAR50 index's fall from its July high, in under four months, according to UkrMedia and Geo News. The index covers leading AI and semiconductor companies.
• $480 billion: The approximate market value wiped out by that decline.
• 20%: The drop in the broader CSI 300 index of large mainland companies from its June peak. Geo News reported that the index has entered bear market territory after ten consecutive weekly declines.
• 42% and 57%: Goldman Sachs estimates that AI-linked stocks had grown to 42% of market capitalization and 57% of turnover across mainland-listed A-shares and Hong Kong's H-shares. That concentration is why so many investors felt the losses.
• 128.7 billion yuan ($19 billion): Last week's inflows into nine exchange-traded funds actively traded by state-backed investors, per Bloomberg data. That is the most since nearly 140 billion yuan flowed in during April 2025, when U.S. tariffs rattled markets.
• 100 versus 30: The STAR50 trades at roughly 100 times trailing earnings, down from nearly 250 at its peak. The Nasdaq 100's comparable multiple is about 30.

What set off the decline

The Economic Times reported there was no obvious trigger for the selling. Traders pointed to a mix of high prices, tax bills and the threat that the United States or other countries could ban Chinese equipment in data centers. UkrMedia added that investors worried the market value of Chinese companies was rising much faster than their actual profits.

Beijing-based fund manager Dong Baozhen told the Economic Times that the market had turned into a speculative frenzy and that “now we see the bubble bursting.”

The slump looks far deeper than the one in the U.S. According to Reuters, as cited by UkrMedia, the Nasdaq is down about 6% from a record high set three weeks earlier. The Economic Times said the Chinese rally had run higher than those in Western or other Asian markets.

Where individual stocks stand

Robot-maker Unitree Robotics has become a symbol of the reversal. UkrMedia reported that demand from retail investors for its August listing exceeded the shares on offer by about 8,000 times. Both UkrMedia and Geo News said the stock has since lost about half its value.

Geo News reported that chipmakers MetaX and Moore Threads have each lost about half their value since July. UkrMedia noted that both had posted gains of hundreds of percent in their debuts last year. Companies that depend on supplying data-center equipment abroad have been hit especially hard, UkrMedia said.

Why it matters for investors and the wider AI industry

Because the market is dominated by small investors, according to the Economic Times, the losses are widespread among ordinary households rather than confined to big institutions. UkrMedia said many retail buyers had expected the rapid growth to continue.

The slump may also make it harder for companies to raise money. Hong Hao, managing partner at Lotus Asset Management, said the situation could push many firms to postpone their stock offerings, UkrMedia reported. Start-ups are especially vulnerable, since they spend heavily on AI, robotics and chips without yet earning stable profits. Geo News said the collapse threatens tech fundraising and new listings.

The turmoil is also a policy problem. According to UkrMedia, Beijing has tried to build a market with stable, long-term growth while limiting speculation and risky lending. The AI frenzy pushed in the opposite direction.

How analysts read what comes next

Analysts are divided, UkrMedia reported. Some investors think prices have not yet hit bottom, and the still-high valuations feed that worry. Others see a chance to buy promising companies more cheaply. Goldman Sachs has put makers of chips and optical components on its updated list of Chinese tech companies for investors to watch. Market participants also warned that price competition among Chinese AI hardware makers could cut into profits even at successful firms.

UkrMedia stressed that the fall does not mean AI development in China has stopped. It shows how heavily the market values of these companies depend on expectations of future growth and on investors' willingness to fund costly research.

Around Prague, based on reporting by The Economic Times, UkrMedia News, Geo News