China loses $480 billion in AI bubble as STAR 50 Index falls 40%

The Shanghai Stock Exchange's STAR50 index has fallen more than 40% in about four months from its high at the end of June, wiping out more than $480 billion in market capitalisation. The market began from the situation in early 2025 described as the DeepSeek moment, and was supported by expectations for the spread of low-cost models and the realisation of an independent AI supply chain. Delays in generating actual profits and rising costs, however, have weighed on the market.

According to analysis, AI accounts for more than 42% of the total market capitalisation of Chinese stocks and 57% of trading value, with the contraction in STAR50 spreading as a broad impact across technology-related stocks. The CSI300 index has fallen about 20% from its June peak, while surrounding markets have also been under broad pressure.

Among individual stocks, Unitree fell well below its IPO-day price and continued to correct thereafter. Moore Threads and MetaX, both linked to humanoid robots, have also fallen to roughly half their valuations since July, while Zhongji Innolight and Eoptolink, makers of optical components and high-speed transmission modules, recorded declines of up to about 60%. Unitree reported third-quarter revenue of CNY 665 million and net income of CNY 113 million, while research and development expenses increased.

Spillover effects at home and abroad have also been pronounced. SoftBank Group has continued investing in AI-related areas, while the impact has extended across the Japanese market. The Nikkei Average fell sharply in October, and the ranking of the largest companies by market capitalisation has shifted, including Hitachi and Recruit, against a backdrop of demand for semiconductor equipment in the Tokyo market and the weighting of China-related businesses. Warnings from the IMF and analysis by the ECB also suggest risks from AI-related investment and changes in the financing environment.