China’s AI Bubble Bursts as US$480 Billion Wiped Off Stock Market

China’s artificial intelligence (AI) boom has suffered a massive financial blow, with approximately US$480 billion wiped off the value of its leading technology stocks in less than four months.

According to a Reuters report published on October 26, China’s STAR 50 index, which tracks major technology and semiconductor companies, has plunged by around 40 percent since July, raising serious concerns about the future of the country’s AI investment boom.

The collapse comes after years of excitement surrounding China’s growing AI industry, with investors pouring billions into companies developing advanced computer chips, robotics and artificial intelligence systems.

Some of China’s biggest technology companies have suffered particularly heavy losses.

Chinese robotics company Unitree has lost approximately half its share value since listing in August, while semiconductor companies MetaX and Moore Threads have also seen their shares fall by around 50 percent since July.

Two major suppliers of optical components used in data centres, Zhongji Innolight and Eoptolink, have lost roughly 60 percent of their value from earlier peaks.

The crash has also affected China’s wider stock market, with the country’s CSI 300 index falling approximately 20 percent from its June high.

Analysts believe the sell-off has been driven by growing concerns that investors placed unrealistic values on AI companies without sufficient evidence that they could generate the profits needed to justify those prices.

Concerns about future demand, increasing competition and possible restrictions on Chinese technology exports have added further pressure.

The downturn is particularly significant because China has invested heavily in developing its own AI industry as it competes with the United States for global technological leadership.

According to Goldman Sachs figures cited by Reuters, AI-related stocks had grown to account for approximately 42 percent of market capitalisation across mainland Chinese and Hong Kong shares.

The collapse has now raised questions about whether the global AI investment boom could face similar problems.

However, the stock market crash does not mean China’s AI technology has failed. Rather, it shows that investors are increasingly questioning whether the industry’s financial performance can match the enormous expectations surrounding it.

While some analysts believe the falling share prices could create new investment opportunities, others warn that further losses remain possible.

The developments in China could serve as a warning to global investors that even the world’s fastest-growing technology industries are not immune to financial bubbles.