China’s AI and chip stocks have fallen hard enough to erase roughly $480 billion in value. Shanghai’s STAR50, the benchmark for the country’s leading names in both fields, is down 40% in under four months, Seoul Economic Daily reported on 27 October 2026. The Nasdaq, by contrast, has pulled back just 6% from a record high set three weeks ago.
Reuters figures cited by the paper show the STAR50 settled at 1,315.50 on 26 October, down 2.23% on the day and 26.39% across three months. The broader CSI300, China’s blue-chip gauge, finished essentially flat on the day but sits about 20% under its June peak. The Chinese drawdown is steeper than anything in Western markets or elsewhere in Asia.
The scale matters because AI is no longer a corner of the Chinese market. Goldman Sachs estimates that AI-related companies account for 42% of the combined value of every listed Chinese company, and 57% of turnover on both the mainland and Hong Kong boards. When that much of the market moves together, a sector selloff becomes a market selloff.
Traders pointed to several causes: stretched valuations, tax burdens, and the possibility that Washington bans Chinese-built hardware from American data centers. The slide also followed regulatory guidance aimed at leveraged and high-frequency trading, and state-owned investment institutions sold into the rally afterward. Fund manager Dong Baozhen put it bluntly: “The market has degenerated into a speculative frenzy.” He added: “What we are watching now is the bubble bursting.”
Retail favorites took the worst of it once institutions stepped back. Unitree, the robotics maker whose share offering drew orders for 8,000 times what was available, has shed roughly 50% since it started trading in August. Memory chipmaker CXMT is down more than 25% in a month. Two chip designers, MetaX and Moore Threads, opened up 700% and 400% on day one of trading last year and have each lost half of that value since July. Zhongji Innolight and Eoptolink, which make optical components, trade about 60% under their June and July peaks.
Valuations are the reason some investors expect more pain. The STAR50’s earnings multiple has dropped from a peak near 250 to nearly 100, still more than triple the Nasdaq 100’s figure of about 30. A market that has fallen 40% and still trades at that multiple has not yet priced in a slowdown.
Not everyone is selling. HSBC Research found that funds in Asia dumped Chinese stocks for three months, then began buying back in. Goldman Sachs put dozens of Chinese AI names, Zhongji Innolight and CXMT among them, on a buy list it overhauled early in October. BNP Paribas Securities strategist William Bratton says careful investors now have a chance to buy.
The fallout reaches past trading screens. Hong Hao, who runs investments at the Hong Kong firm Lotus Asset Management, said the rout “will stop many companies that were preparing to list in their tracks.” Leo Wang of Chanchuang Capital argued that the heavy weighting of technology in major indexes has starved other sectors of funding.
A sector whose flagship debut was so oversubscribed now has to explain why that stock trades at half its value, and any company planning a listing in the next quarter will be pitching into that doubt.
Reported by Seoul Economic Daily on 27 October 2026, citing Reuters, Goldman Sachs, and HSBC Research.
