China's AI stocks lose 40% in four months

Reuters reported on 26 October that the STAR 50 index, covering the 50 largest companies on Shanghai's tech-focused STAR market, has fallen 40% in under four months, erasing about $480 billion. It closed at 1,315.50 that day, down 2.23%. The broader CSI 300 is about 20% below its June peak. Fund manager Dong Baozhen said what investors are watching is the bubble bursting.

Humanoid robot maker Unitree, whose August IPO drew roughly 8,000 times retail demand, has nearly halved since listing. Memory maker CXMT lost more than a quarter of its value in a month. The index still trades near 100 times trailing earnings, down from almost 250, against about 30 for the Nasdaq 100.

Unitree shows how AI and robotics excitement hits retail investors: record IPO demand reversed quickly once trading began, and China's large retail share makes such swings sharper than in the US.

Traders cite stretched valuations, taxes and fears that the US and others may bar Chinese equipment from data centres. Curbs on margin trading added pressure. The "bubble" label is Reuters' framing, not a settled verdict.

Rivalry between the US-led Pax Silica alliance and China's WAICO initiative, which AP says is pressuring countries to pick sides, adds to export-control worries.

The P/E ratio divides share price by annual earnings per share; 100 implies very high growth expectations. Margin trading means buying shares with borrowed money, which can speed up sell-offs when prices fall and lenders demand more collateral from investors.

The slide is a warning for global AI investment, echoed by Apollo's Torsten Slok and Elon Musk the same week. Yet DeepSeek founder Liang Wenfeng entered the Hurun list at No. 7 with $41.7 billion, so interest in AI remains; prices are being forced back towards earnings.

• Pick tools by results, not by valuation headlines.
• Avoid relying on one small provider that may cut costs.
• Write down the payback period of each AI spend.