Chinese AI and semiconductor index drops over 40 percent
China's leading AI and semiconductor index has lost over 40% since its July peak, prompting analysts to declare the local AI bubble has burst. Regulatory threats and high valuations are driving further selling pressure.
The Chinese leading index for AI and semiconductor companies has lost over 40 percent since its July peak. Analysts describe the AI bubble in China as having already burst, citing high valuations, tax demands, and the threat of bans on Chinese technology in foreign data centers as primary drivers of the decline. The index remains significantly more expensive than comparable US indices, suggesting that further selling may occur. Many companies are expected to postpone planned IPOs in response to the deteriorating market conditions.
The securities regulator is currently collecting proposals to curb volatility, leverage, and high-frequency trading. This regulatory scrutiny adds to the uncertainty facing the sector. The decline reflects a broader reassessment of the sustainability of high AI sector valuations in the Chinese market. As the index continues to fall, investors are increasingly wary of the risks associated with the sector's rapid expansion and the potential for stricter government intervention.