Chinese Tech Indexes Extend Losses as AI Trade Weakens

China’s technology shares have become the biggest losers in a faltering global AI trade, with the Star50 Index down nearly 40% during the current half-year. The hardware-focused ChiNext Index has fallen 36%.

Chipmakers MetaX Integrated Circuits Shanghai and Moore Threads Technology have each lost around half their value over the period. CXMT, which went public in July, is down 27% from its post-listing peak, while Yushu Technology has fallen around 50% from an August high.

The retreat follows a rally that lifted the Star50 about 75% between April and June. Bloomberg Intelligence analysts Jason Liao and Marvin Chen said the global AI-hardware sell-off hit Chinese A-shares especially hard after foreign investors crowded into the sector in the second quarter.

Outflows through a Hong Kong link giving foreign investors access to Chinese local stocks reached an estimated 90 billion yuan in the third quarter, the analysts said. That reversed more than half of the inflows recorded from April through June.

The pullback threatens a funding channel for Chinese AI companies, which have shown a preference for equity financing, according to portfolio manager Leonid Mironov of Gavekal Capital. He said a slump lasting more than six months would make fundraising difficult.

Financial regulators discussed market-stabilisation measures on Oct. 15 and called on state-backed funds to accelerate stock purchases. The Star50 still trades at more than 40 times forward earnings, while Gam Investment Management fund manager Jian Shi Cortesi said many high-potential technology shares would need to fall another 30% to 50% before becoming bargains.