China's AI Bubble Bursts as Chip and Robotics Stocks Crash, Erasing $480 Billion

China's technology stocks are in retreat, and investors are calling it the bursting of a bubble. Concern about AI demand, tightening export controls, and stretched valuations have collided: chipmakers and robotics names are down as much as 60%, and roughly $480 billion (about NT$15.6 trillion) in market value has been erased, according to Reuters.

The sell-off has ended a two-year bull run and dealt a setback to Beijing's push to get household savings flowing into stocks to support the AI build-out.

The China AI Bubble Is Bursting

The STAR 50 index, which tracks China's A-share sci-tech board and is heavy on AI and semiconductor leaders, has fallen 40% in less than four months, wiping out about $480 billion in market value. The broader CSI 300 is down roughly 20% from its June high.

The decline has slammed the brakes on a rally that began on the back of economic stimulus promises, and it has upended Beijing's plan to steer the market away from long boom-bust cycles toward a steadier "slow bull." "The stock market later turned into a crazy speculative bull market, and now we see the bubble bursting," said Dong Baozhen, a Beijing-based fund manager.

What Got Hit: Chip and Robotics Darlings

The retail darlings that led the rally are now leading the drop.

• Unitree Robotics, the robot maker that drew 8,000x oversubscription at its IPO, has halved since trading began in August.
• YMTC (Yangtze Memory) has lost more than a quarter of its value in the past month.
• Xiangji Technology and Moore Threads, which surged 700% and 400% respectively on their first trading day last year, have also halved since July.
• Optical-component makers Zhongji Innolight and Eoptolink are down about 60% from their June and July highs, partly because Washington is moving toward banning these former favorites from supplying U.S. data centers.

Why the Sell-Off Is So Brutal

The reason almost nobody is spared is how concentrated the trade has become. According to Goldman Sachs, AI-related stocks now make up 42% of China's total market value and account for 57% of trading across A-shares and Hong Kong H-shares. In a market dominated by retail investors, a reversal of that scale sweeps nearly everyone out at once.

Valuations still look stretched even after the fall. The STAR 50, off from a record near 250, still trades at roughly 100x forward earnings, compared with about 30x for the Nasdaq 100 — and that leaves investors worrying the sell-off has further to run before it stabilizes.

For now, many domestic investors are staying on the sidelines, waiting for valuations to fall further or for other sectors to offer a safer entry point.