Chinese Stocks Lose $2.4 Trillion as AI Shares Slide

Key Facts

Mainland Chinese stocks have lost about $2.4 trillion in market value since May, according to a report published by Decrypt on October 27. The losses came as doubts resurfaced over whether AI companies can justify their high valuations, after they led a powerful market rally. The STAR50, which includes prominent AI and semiconductor companies, fell 40% in less than four months through October 26. The decline erased about $480 billion in market value, according to a Reuters report. That puts the broader losses in Chinese stocks in the context of a concentrated retreat in a sector that was among the market's biggest drivers of gains.

AI stocks' large share of the market amplified the impact of the decline. Goldman Sachs estimated that these stocks represent 42% of total market capitalization and 57% of trading in mainland-listed A-shares and Hong Kong-listed H-shares. Those figures cover both markets and are not limited to mainland Chinese stocks. Goldman Sachs had also estimated that Chinese-listed companies linked to AI added nearly $5 trillion in market value since the start of 2025, through share-price gains and initial public offerings. The wide gap between those earlier gains and more recent losses underscores the market's exposure to the sector's stocks.

Pressure spread to broader indexes, with the benchmark CSI300 falling about 20% from its June highs through October 26. Meanwhile, the STAR50 was valued at about 100 times trailing earnings, after approaching 250 times at its peak. Investors compared that level with the Nasdaq 100's multiple of 30 times at the time of Reuters' October 26 report. Reuters quoted traders as saying high prices, taxes and the risk that other countries would ban Chinese equipment in data centers had contributed to the pressure. The report did not identify a single clear trigger for the sell-off, putting the decline in the context of a mix of valuation concerns and trade-policy risks.

Beijing-based fund manager Dong Baozhen said the market had "later turned into a wild speculative rally," adding: "We are now seeing the bubble burst." The view reflects a shift in sentiment after a wave of speculation in companies linked to AI, Reuters reported. The sharpness of the correction was evident in individual stocks: shares in robot maker Unitree have lost half their value since trading began in August, despite retail investor orders at its listing exceeding the shares available 8,000 times. Chip company CXMT fell more than a quarter in the month before the October 26 report. Shares in optical-component makers Zhongji Innolight and Eoptolink fell about 60% from their June and July peaks, partly as Washington moved toward banning their supply to U.S. data centers.

The decline came as National Bureau of Statistics data showed annual economic growth of 4.6% in the first three quarters of 2026. Gross domestic product grew 4.5% year over year in the third quarter and rose 1.2% from the previous quarter. In industry, value added in high-tech manufacturing increased 14.3% year over year in the first three quarters, compared with growth of 5.3% in total value added at industrial enterprises above designated size. The indicators showed high-tech industrial activity continuing to grow during a period in which AI stocks first climbed and then underwent a sharp valuation correction. The official manufacturing purchasing managers' index also registered 50.1% in September, up 0.3 percentage points from August and back in expansion territory.

In early Asian trading on October 28, the Hang Seng Index fell 0.7%, while the Shanghai Composite rose 0.5%, according to the Associated Press. The moves showed a divergence between the two markets in that session, with Hong Kong stocks under pressure while the Shanghai Composite gained. Investors are now focused on the monthly purchasing managers' index report, due on October 31 at 9:30 local time, according to the Chinese National Bureau of Statistics calendar. The Caixin/RatingDog manufacturing index follows, with October data scheduled for November 2, according to Investing.com's calendar. The releases provide two upcoming checkpoints for tracking Chinese manufacturing activity after September's reading returned to expansion territory.