Stocks on China's mainland have lost about $2.4 trillion in market value since May, as investors lose faith that Beijing's AI boom will ever turn a profit. That amount is more than South Korea's entire annual economic output.
AI companies now make up 42% of the market value of Chinese shares listed on the mainland and in Hong Kong, and 57% of trading, according to Goldman Sachs. As a result, when AI stocks fall, the whole market falls with them.
Indexes Enter Bear Market
The CSI 300, an index of China's 300 biggest listed companies, entered a bear market on October 22, defined as a drop of at least 20% from its peak.
The sharpest damage hit Shanghai's STAR 50, an index of 50 large tech and chip companies. It fell 40% in less than four months, erasing about $480 billion in market value.
The STAR 50 still trades at roughly 100 times earnings, down from nearly 250 at its peak. By comparison, the Nasdaq 100, the U.S. tech benchmark, sits around 30 times earnings.
AI Advances and Policy Shifts
DeepSeek, a Chinese startup, released a cheap and powerful chatbot in January 2025, and Nvidia, the U.S. company whose chips power most AI, lost nearly $600 billion in market value in a single day. Moonshot AI's Kimi K3, also produced by a Chinese AI lab, sent chip stocks tumbling again in July.
Beijing then pushed its tech giants toward homegrown chips. According to the Financial Times, its internet regulator reportedly told companies including ByteDance and Alibaba to stop buying Nvidia chips in September 2025. Z.ai, a Beijing lab, says it trained its GLM-5.2 model entirely on Huawei chips.
Weak Consumer Spending and Speculative Excess
Analysts blame weak spending by Chinese consumers and doubts that AI companies can earn back what they have invested. Robot maker Unitree drew retail orders for 8,000 times the shares on offer when it listed in August, and its stock has since lost almost half its value since launch, even after a significant recovery this week.
“The stock market later evolved into a speculative crazy bull,” said Dong Baozhen, a Beijing-based fund manager. “And now we see the bubble bursting.”
U.S. Restrictions Add Pressure
The U.S. Federal Communications Commission banned imports of new foreign-made humanoid robots in July on national security grounds. Washington is also moving to ban Chinese-made optical parts from U.S. data centers, and the makers Zhongji Innolight and Eoptolink are down about 60% from their peaks.
Broader market pressures are also weighing on risk assets worldwide, with Brent crude above $111 and 10-year Treasury yields near 5%. Bitcoin briefly fell under $80,000 ahead of the Federal Reserve's October 28 decision.
