Has China's AI bubble burst?

The STAR 50 trades at about 100 times trailing earnings, down from nearly 250 at its peak. The Nasdaq 100 trades at about 30 times. China's blue chip CSI 300 index is down about 20% from its June peak. Goldman Sachs says AI stocks make up 42% of China's market value and 57% of turnover across mainland and Hong Kong markets.

Individual companies fell harder. Robot maker Unitree has roughly halved since its August listing, which retail investors oversubscribed 8,000 times. Chipmaker CXMT is down more than a quarter in a month. MetaX Integrated Circuits and Moore Threads have each lost about half their value since July. Optical component makers Zhongji Innolight and Eoptolink are down about 60% from their summer peaks, partly because Washington is moving to ban them from supplying US data centres.

Reuters reported no single trigger. Traders cited high valuations, tax bills, concerns about AI demand, restrictions on Chinese exports and the threat of bans on Chinese equipment in data centres. State backed investors have also been selling into rallies. The Nasdaq is down 6% from a record reached three weeks earlier.

The New York Times reported in August that African developers are increasingly choosing Chinese open weight models over costlier US ones. Its example was Sunflower, a Ugandan language model covering 31 local languages, built on Alibaba's Qwen 3. Bloomberg reported in October 2025 that DeepSeek had taken meaningful market share in Ethiopia and Zimbabwe.

Hardware is the other link. Reuters reported on 10 September that Huawei raised the price of its Ascend 950DT accelerator card by 20% to 50% depending on contract terms, and that Cambricon reportedly raised the price of its next processor by 20% to 30%. Reuters linked the rises to a global memory shortage. At the start of October, Kenya announced plans for a national AI data centre with Huawei, meant to give local startups and researchers computing resources and reduce reliance on foreign data hosting.

Wang Zhuo, a partner at Shanghai Zhuozhu Investment Management, said Chinese chipmakers and AI suppliers will eventually face the same price competition as other Chinese manufacturers. In May 2024, Alibaba cut prices on its Qwen models by up to 97%, and ByteDance said its Doubao model would cost business users 99.3% less than the industry average.

Reuters reported that the frustration could push investors toward defensive assets and slow fundraising by tech companies. BNP Paribas Securities said the market offers chances for cautious investors, and HSBC research found Asia focused funds remain overweight China, though they have been net sellers over the past three months.