China's AI bubble has begun to burst: STAR50 index down 40% since July

The tech sector crash

Since July 2026, the STAR50 index of the Shanghai Stock Exchange, which brings together technology companies, has fallen by 40%, and the combined market capitalization of its constituent firms has shrunk by $480 billion. This is reported by Kun.uz citing Western media. Fund manager Dong Baozhen called the stock market a speculative bubble that cannot withstand the test of common sense, which, in his words, is bursting right now — these remarks were cited by Reuters.

The scale of the market's dependence on AI

The decline affected almost the entire sector. According to Goldman Sachs figures cited by the publication, shares of artificial intelligence companies account for 42% of the market capitalization of all Chinese companies and 57% of trading turnover, which worsens the situation. Individual examples are telling: shares of robot maker Unitree, whose IPO demand exceeded supply 8,000-fold, have halved in price since trading began in August; shares of chip maker CXMT have lost more than a quarter of their value over the past month; and shares of chipmakers MetaX Integrated Circuits and Moore Threads Technology, which surged 700% and 400% respectively upon going public last year, have also halved since July.

Causes and diverging assessments

According to experts, there is no single specific cause of the decline: inflated prices, tax liabilities, and the risk that the US or other countries may ban the use of Chinese equipment in data centers all played a role. At the same time, assessments of what is happening differ. Some specialists do not see a catastrophe in the mass sell-off: Goldman Sachs' updated recommendation list, published at the beginning of this month, includes Chinese AI companies Innolight and CXMT. William Bratton of BNP Paribas Securities, according to the publication, believes that the current state of the market creates good buying opportunities.