China’s STAR50 Index Falls 40%, Wiping Out About $480 Billion in Less Than Four Months

Key Facts

China’s STAR50 Index, which includes leading artificial intelligence and semiconductor companies, fell 40% in less than four months through October 26, 2026, wiping out about $480 billion in market value, according to a Reuters report carried by MarketScreener. The report puts the losses in the context of a retreat in Chinese technology stocks after a two-year rally. Investors described the move as a bubble bursting, but that characterization reflects a market reading and does not establish that the entire sector has collapsed. The $480 billion represents market value erased alongside the index’s decline, not an estimate of the value of China’s entire AI market. The scale of the drop offers a measure of how far speculative trading in AI and chip stocks has receded.

Pressure spread to the broader Chinese market, with the benchmark index falling about 20% from its June peak through October 26. The report identified no clear trigger for the selling, but cited traders who said elevated prices, taxes and the threat of the United States or other countries banning Chinese equipment in data centers all contributed to the pressure. These factors leave chipmakers and AI suppliers facing a mix of valuation risks and restrictions on access to markets and technology. AI stocks accounted for 42% of market capitalization and 57% of trading across mainland and Hong Kong shares at the time of publication, according to Goldman Sachs as cited by Reuters. That illustrates how concentrated market activity had become in the theme before the selloff.

Losses were evident in individual companies’ shares. Robotics specialist Unitree lost half its value since beginning trading in August, despite retail investor demand in its listing exceeding the shares on offer by 8,000 times. Chipmaker CXMT also lost more than a quarter of its value in the month before the report. In the October 9 session, the STAR50 fell about 4% to a five-month low during a selloff in AI supply-chain stocks. In the same session, the coal index rose 1.4% and consumer staples stocks gained 0.6% as investors shifted into defensive and traditional sectors. The moves reflect a rotation away from technology-linked growth stocks toward sectors seen as more defensive during the selloff.

Despite the decline, the STAR50 remained at about 100 times trailing earnings at the time of the report, after its price-to-earnings ratio peaked at about 250 times. The report compared that valuation with the Nasdaq 100’s 30 times, pointing to the widening gap between Chinese and U.S. technology stock valuations under the measures cited. Beijing-based fund manager Dong Baozhen said the stock market “later turned into a wild speculative rally,” adding: “Now we are seeing the bubble burst.” His view describes one fund manager’s interpretation of the rally, while index and individual stock losses remain the direct measures of the decline. The multiple’s continued elevation, despite falling from its peak, puts valuations at the center of the debate over the sector.

Fund manager Wang Zhu said chip and AI suppliers could end up in a price war, adding that bubbles inevitably burst. The report said frustration over investor losses in a theme backed by Beijing had pushed many toward defensive assets and could slow technology companies’ fundraising through equity markets. These concerns raise the importance of tracking whether companies can continue to finance their expansion through the market as sector shares fall. On foreign investment, China’s actually utilized foreign investment totaled 548.81 billion yuan in January–September 2026, down 4.3% year over year, according to China’s Ministry of Commerce. September inflows, however, rose 2.5% year over year, while actually utilized investment in high-tech industries increased 33.8% over the nine months, accounting for 41.6% of the total; the overall decline therefore does not by itself mean investors are turning away from technology.

China’s manufacturing Purchasing Managers’ Index stood at 50.1 in September, up 0.3 percentage points from the previous month, according to the National Bureau of Statistics, putting it in expansion territory by the index’s reading. The bureau scheduled the release of its monthly October PMI report for October 31, 2026, at 9:30. The report’s release is a near-term checkpoint for tracking industrial activity after September’s reading. The official release announcement did not state its implications for domestic demand or technology stocks. These economic data, alongside valuations and technology restrictions, remain among the factors the market is monitoring as the sector’s shares continue to be repriced.