China’s technology sell-off has exposed growing doubts about whether the artificial-intelligence boom can justify the valuations built up over the past two years, even as broader Asian markets rebounded on Tuesday.
Reuters reported on Monday that the STAR 50 index, which tracks technology and semiconductor companies, had fallen about 40% in less than four months, wiping roughly $480 billion from the market value of its constituents. The broader CSI 300 index was about 20% below its June peak. The Guardian reported on Tuesday that Chinese and Hong Kong markets had lost around $2.4 trillion in combined value since May, a wider measure than the losses in the STAR 50 index.
Investors have become more cautious about the pace at which AI-related companies can turn heavy spending into sustainable profits. High valuations, uncertainty over demand, tax pressures and the risk of tighter US restrictions on Chinese technology suppliers have added to the pressure. The concentration of AI and semiconductor shares in China’s market has also magnified swings for retail investors.
The mood across Asia was less pessimistic on Tuesday, with regional stocks rising as investors looked ahead to earnings from major US technology companies and upcoming central-bank decisions. That rebound has not erased China-specific losses, but it illustrates how quickly sentiment can shift between fears of overinvestment and expectations that demand for AI infrastructure will remain strong.
The outlook remains contested. Some investors view the correction as an opportunity to buy companies at more reasonable prices, while others warn that fierce competition, price cuts and weak consumer demand could keep profit margins under strain. For Beijing, the sell-off also complicates efforts to encourage household investment and build confidence in the country’s technology sector.
