Growing technological competition with the United States and concerns over potential new restrictions on Chinese companies have unsettled investors. According to Reuters, the Star50 index, which tracks 50 major Chinese technology companies, has fallen 40% in less than four months. Reuters describes the situation as an AI bubble that has already burst in China, while Futurism suggests the bubble may instead be beginning to deflate.
Since June 2026, artificial intelligence and semiconductor companies included in the index have lost approximately $480 billion in combined market value.
Shares of robotics manufacturer Unitree have fallen by roughly half since August. Chipmakers MetaX and Moore Threads have also lost around 50% of their share value since July. Shares of Zhongji Innolight and Eoptolink, which supply optical components for data centers, have declined by about 60% from their summer 2026 peaks. All five companies ended trading lower on October 27.
According to Bloomberg, China’s stock market has lost $2.4 trillion since May 2026. Goldman Sachs estimates that AI-related stocks account for more than 40% of the combined market value of stock markets in mainland China and Hong Kong.
One major concern is the possibility that the United States will impose stricter restrictions on Chinese AI services and technologies. The Guardian reports that the prospect of additional controls has contributed to investor anxiety.
In late July, the United States banned imports of humanoid and quadruped robots from China. Axios also reported that the US Department of Commerce had considered adding several Chinese AI model developers to a sanctions list and requiring American companies to obtain permission before working with their models.
Following July allegations that Moonshot AI had distilled Anthropic’s Fable 5 model, US Treasury Secretary Scott Bessent said the government would consider sanctions if the practice continued. Around the same time, Nvidia, Microsoft, Palantir, Andreessen Horowitz, Black Forest Labs, Hugging Face, Mistral and Replit voiced support for open AI models.
The Guardian identifies another factor behind the market decline: China’s economy may be struggling to support the rapidly expanding domestic technology market. Meanwhile, Reuters and Bloomberg reported, citing sources, that DeepSeek raised approximately 100 billion yuan, or $14.98 billion, toward the end of October.
