In China, the AI bubble has already burst

China’s AI-Stock Sell-Off

China’s AI-stock sell-off has been much sharper than the US market’s. The STAR 50 index fell about 40% over four months, wiping out roughly $480 billion in market value, while the Nasdaq was down around 6%. Some prominent suppliers of data-center optical equipment and chipmakers lost 50% to 70% of their share value.

Possible Causes

The report points to several factors behind the downturn:

• Tax-payment deadlines
• Valuations that assumed demand would continue to rise
• Concerns that US companies may avoid Chinese equipment, limiting firms’ prospects for global sales

Private investors were especially exposed. Unitree, a popular robotics company, reportedly drew demand for its shares far above supply during a placement. Investors who bought after trading began were left with steep losses. Some had viewed government-backed AI as a relatively safe investment.

A Shift in AI Investing

The downturn also signals a shift in AI investing: attention is moving away from suppliers and infrastructure companies toward businesses that can show where and how they will generate AI profits.

Presenter/contributor: Tom Westbrook