For nearly two years, Chinese AI and semiconductor shares had ridden a powerful rally. Then the mood changed. By October 26, 2026, a sharp selloff had wiped away huge amounts of market value, leaving investors to reckon with how quickly enthusiasm can turn into losses.
The scale was striking. China’s mainland STAR 50 index, which includes many technology companies, fell 40% in less than four months, erasing about $480 billion in market value. The country’s broader blue-chip index stood about 20% below its June high. In comparison, the Nasdaq had slipped roughly 6% from its recent record, with U.S. AI stocks helping lead that decline. The figures describe a much steeper drop in China at the time Reuters published its report—not a comparable U.S. crash.
There was no single, obvious event that explained China’s sudden reversal. Traders pointed to several possible pressures: high share valuations, tax bills and concerns that the United States or other countries might restrict Chinese equipment from data centres. Those explanations offer clues, but the report does not identify one definitive cause.
The rally had made AI a major force in China’s stock market. Figures from Goldman Sachs cited by Reuters put AI stocks at 42% of China’s market capitalisation and 57% of trading turnover across mainland-listed A-shares and Hong Kong-listed H-shares. With small investors making up much of the market, a broad retreat could leave many people facing losses.
Some once-celebrated companies have already seen dramatic falls. Robot-maker Unitree attracted retail orders 8,000 times the amount of shares offered in its listing, but its share price had fallen by half since trading began in August. Chipmaker CXMT lost more than a quarter of its value in the preceding month. MetaX Integrated Circuits and Moore Threads Technology, whose shares had jumped 700% and 400% on their market debuts the previous year, had each shed about half their value since July.
The numbers are personal as well as financial. Reuters describes an investor who bought shares believing the government supported companies such as Unitree, which counted state-backed funds among its investors. After the decline, the investor was left nursing losses—a reminder that perceived official backing does not prevent a share price from falling.
The selloff could also affect what happens next. Frustrated investors may turn toward more defensive assets, while technology firms could find it harder to raise money through share offerings. The decline also complicates Beijing’s effort to channel household savings into equities and build a steadier market, described as a “slow bull.”
For now, the report points to a sharp correction in Chinese AI and semiconductor shares, not proof that a wider financial crisis has begun. It also does not show that China’s losses will trigger a similar fall in the United States. The episode leaves a useful question for investors and observers alike: when a fast-growing market becomes crowded with optimism, what happens when confidence begins to fade?
Source: In China, the AI Bubble Has Already Burst, Reuters (published by U.S. News)
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