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Stocks Fall Despite China's Market Support Efforts
· Confirmed
In Short: The spike in rates seems to defy Treasury Secretary Bessent’s efforts to suppress costs when he ordered the Treasury Department to buy back $5.2 billion of long-dated debt, crossing the 5 percent threshold and demonstrating the limits of the Treasury secretary’s ability to bend global markets to his will.
The STAR50 index, which tracks major technology and semiconductor companies in China, has plunged 40% in less than four months, wiping out about US$480 billion in market value and exposing the risks of inflated valuations and mounting uncertainty over demand for AI technology.
According to Goldman Sachs, AI-related stocks account for 42% of China’s market capitalization and 57% of turnover across mainland-listed A-shares and Hong Kong-listed H-shares, leaving a large share of the market exposed to the downturn.
Robot-maker Unitree has lost half its value since beginning trading in August, while chipmakers MetaX Integrated Circuits and Moore Threads Technology, which surged 700% and 400% respectively on their market debuts in 2025, have also halved from their July levels.
Despite the sell-off, the STAR50 still trades at about 100 times trailing earnings, down from a peak of nearly 250 times, compared with about 30 times for the Nasdaq 100, underscoring concerns that valuations remain stretched.
The mainland STAR50 index has fallen 40% over the period, while China’s broader blue-chip index has dropped about 20% from its June peak.
The sell-off threatens to undermine Beijing’s efforts to encourage households to invest in equities to help finance the country’s AI ambitions, after a two-year rally fueled by expectations of economic stimulus and government support for technology industries.
Fund manager Wang Zhuo of Shanghai Zhuozhu Investment Management noted, “Just like all other Chinese manufacturers, (chipmakers and AI suppliers) will eventually end up in a price war,” adding, “And now we see the bubble bursting.” Unlike the recent pullback in US technology shares, the Chinese sell-off has been particularly severe, with investors reassessing lofty valuations amid concerns about AI demand, potential export restrictions, and the possibility of Chinese equipment being barred from overseas data centers.
What's confirmed
- The STAR50 index, which tracks major technology and semiconductor companies in China, has plunged 40% in less than four months, wiping out about US$480 billion in market value and exposing the risks of inflated valuations and mounting uncertainty over demand for AI technology.
- According to Goldman Sachs, AI-related stocks account for 42% of China’s market capitalization and 57% of turnover across mainland-listed A-shares and Hong Kong-listed H-shares, leaving a large share of the market exposed to the downturn.
- Robot-maker Unitree has lost half its value since beginning trading in August, while chipmakers MetaX Integrated Circuits and Moore Threads Technology, which surged 700% and 400% respectively on their market debuts in 2025, have also halved from their July levels.
- Despite the sell-off, the STAR50 still trades at about 100 times trailing earnings, down from a peak of nearly 250 times, compared with about 30 times for the Nasdaq 100, underscoring concerns that valuations remain stretched.
- The mainland STAR50 index has fallen 40% over the period, while China’s broader blue-chip index has dropped about 20% from its June peak.
- The sell-off threatens to undermine Beijing’s efforts to encourage households to invest in equities to help finance the country’s AI ambitions, after a two-year rally fueled by expectations of economic stimulus and government support for technology industries.
- Fund manager Wang Zhuo of Shanghai Zhuozhu Investment Management noted, “Just like all other Chinese manufacturers, (chipmakers and AI suppliers) will eventually end up in a price war,” adding, “And now we see the bubble bursting.” Unlike the recent pullback in US technology shares, the Chinese sell-off has been particularly severe, with investors reassessing lofty valuations amid concerns about AI demand, potential export restrictions, and the possibility of Chinese equipment being barred from overseas data centers.
What's still developing
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