China's AI bubble bursts: Stocks lose $480 billion in value

Index down 40 percent in four months

According to Reuters, China's STAR50 index, which tracks AI and semiconductor companies, has lost 40 percent of its value over the past four months. That translates to roughly $480 billion in market value wiped out. A Beijing-based fund manager told Reuters the market first turned into a speculative bull run, and now the bubble is bursting.

Sharp declines in robotics and chips

Shares of robotics company Unitree have halved since its heavily hyped IPO in August. Chipmaker CXMT has lost more than a quarter of its value over the past month. The picture suggests investors' appetite for AI stocks is cooling fast.

Investment hasn't stopped entirely

Still, Bloomberg reported that DeepSeek raised $15 billion in one of the largest funding rounds in the country's history. Huawei also secured a $2.3 billion loan from Chinese banks to spend on AI chips. So the stock market slump has not fully halted private investment.

Part of the pressure comes from the US

According to the report, US tariffs and a potential ban on Chinese companies supplying data center equipment are also weighing on the market. Optical transceiver makers such as Zhongji Innolight are critical for the high-speed data transfers AI requires. Analysts note that China's inability to sell its AI products overseas may also be a factor in the downturn.

The global bubble debate

Goldman Sachs estimates AI stocks make up about 42 percent of China's market capitalization, a share not too different from Western economies. Reuters notes that state-backed investors sold into rallies to curb volatility. The report also cites Anthropic's IPO filing, which disclosed an $80 billion loss and plans to spend another $1 trillion on data centers over the next decade, as fuel for fears that even top players are far from profitable.