China’s AI-Linked Stocks Slide as Investors Question the Boom’s Profitability

Highlights

Since May, mainland Chinese shares have lost about $2.4 trillion in market value, as investors question whether the country’s AI boom can generate lasting profits. AI companies account for 42% of the market value of Chinese shares listed on the mainland and in Hong Kong, and 57% of trading, according to Goldman Sachs. The CSI 300 entered a bear market on October 22, while Shanghai’s STAR 50 fell 40% in less than four months, erasing about $480 billion. Weak consumer spending, high valuations, and U.S. restrictions on technology imports add pressure. The central concern is whether substantial AI investment can be converted into sustainable earnings.

Sentiment Analysis

• Overall sentiment: Negative. The article focuses on steep declines in Chinese stocks, investor doubts, and the possibility that AI-linked valuations have outpaced expected profits.
• Market performance: The reported $2.4 trillion loss since May, the CSI 300’s bear-market entry on October 22, and the STAR 50’s 40% fall in less than four months create a strongly unfavorable tone.
• Business outlook: Questions about weak consumer spending and whether AI companies can earn back their investments suggest uncertainty about future returns rather than confidence in near-term growth.
• External pressures: U.S. restrictions on robots and data-center components, alongside broader global risk pressures described in the source, reinforce the cautious outlook.
• Counterpoint: Continued investment in domestic chips and the reported recovery in a robot maker’s shares this week offer limited signs of resilience. These details do not offset the article’s emphasis on losses and risk.

Article Text

Mainland China’s stock market has shed about $2.4 trillion in market value since May, according to the figures cited in the source. The decline reflects growing investor doubts about whether Beijing’s push to develop artificial intelligence will produce profits commensurate with the money companies are investing. The reported loss is described as greater than the value of South Korea’s entire annual economic output, underscoring the scale of the market retreat.

Artificial intelligence has become a major influence on Chinese equities. Goldman Sachs estimates that AI companies represent 42% of the market value of Chinese shares listed on the mainland and in Hong Kong, and 57% of trading. This concentration means that weakness in AI-related shares can affect market performance more broadly. The CSI 300, which tracks 300 of China’s largest listed companies, entered a bear market on October 22. A bear market is commonly defined as a decline of at least 20% from a previous peak.

The steepest losses described in the article have affected Shanghai’s STAR 50, an index of 50 large technology and chip companies. It fell 40% in less than four months, wiping out about $480 billion in market value. Despite the decline, the index trades at roughly 100 times earnings. The source explains this valuation ratio as a measure of how many years of current profit investors are paying for. At its peak, the ratio was nearly 250. By comparison, the Nasdaq 100, a U.S. technology benchmark, is around 30.

Recent product launches have contributed to sharp swings in technology shares. DeepSeek, a Chinese startup, released a low-cost, powerful chatbot in January 2025. The announcement coincided with Nvidia, the U.S. company whose chips power much of the AI industry, losing nearly $600 billion in market value in a single day. In July, the release of Kimi K3 by Moonshot AI, another Chinese AI lab, again sent chip stocks lower. Such reactions illustrate how developments in Chinese AI products can influence expectations for hardware makers and competitors.

Chinese authorities have also encouraged technology companies to rely more heavily on domestic components. According to the Financial Times, China’s internet regulator reportedly told companies including ByteDance and Alibaba to stop buying Nvidia chips in September 2025. Z.ai, a Beijing-based AI lab, says it trained its GLM-5.2 model entirely on Huawei chips. These developments indicate an effort to build domestic capacity, while also raising questions about access to foreign technology and the economics of developing alternatives.

Analysts cited in the source point to weak spending by Chinese consumers and uncertainty about whether AI companies can recover their investment costs. The example of robot maker Unitree illustrates how enthusiasm at a share offering may not guarantee lasting performance: retail orders reportedly reached 8,000 times the number of shares on offer when the company listed in August. Its stock has since lost almost half its value since launch, even after a significant recovery this week. Beijing-based fund manager Dong Baozhen described the earlier market as a “speculative crazy bull” and said, “now we see the bubble bursting.”

Companies also face regulatory and geopolitical risks. In July, the U.S. Federal Communications Commission banned imports of new foreign-made humanoid robots on national security grounds. Washington is also moving to prohibit Chinese-made optical parts from U.S. data centers. The source says optical-component makers Zhongji Innolight and Eoptolink are down about 60% from their peaks. Together, questions about profitability, domestic demand, valuations, and access to overseas markets help explain why the AI trade has become a source of market-wide concern.

The article also situates Chinese stocks within a wider period of pressure on risk assets. It reports Brent crude above $111, 10-year Treasury yields near 5%, and Bitcoin briefly under $80,000 ahead of the Federal Reserve’s October 28 decision. These figures point to a challenging global backdrop, although the article’s central focus remains the sharp repricing of Chinese AI-related shares and uncertainty over whether the sector’s investment can generate sufficient returns.

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