China’s tech stocks have been hit by a massive sell-off, according to Reuters. The STAR 50 index, which tracks companies in the artificial intelligence and semiconductor sectors, has lost about 40% of its value in less than four months, wiping about $480 billion off its market value.
On 27 October, the downtown still continued, when the index dell for another 4.8% to a seven-month low. The Guardian reported, China’s broader stock market has also come under pressure, losing an estimated $2.4 trillion since May.
AI and Semiconductor companies see steep losses
Several companies that attracted strong investor interest during China’s AI rally have recorded significant declines.
Dan Wang, the China director for the Eurasia Group, said:
This year, the profit margin is not as good as expected. And the US is raising rates. And China’s domestic demand is so weak.
Washington has banned humanoid robots from China, citing national security risks, and is reportedly considering restrictions on Chinese components used in data centres. China’s technology sector relies heavily on exports, making access to overseas markets particularly important. Companies also face challenges at home, where consumer demand for expensive products remains limited.
Wang added:
It doesn’t look like embodied intelligence could turn into profits in the in the mass market.
The share price of Unitree, a manufacturer of robots, has fallen by approximately 50% since it started trading in August. The prices of both MetaX Integrated Circuits and Moore Threads Technology have dropped by around the same percentage since the month of July.
Following the upswing that saw AI-related companies account for almost 42% of the total market value of China, the share values of companies in the sector have fallen.
Investors are increasing their doubts over the ability of AI companies to generate enough revenues to justify their valuations. This comes on top of concerns about the need for demand as well as any possible taxes that the companies might incur and whether there might be any restrictions on Chinese technology providers to serve foreign data centres.
The situation does highlight some problems as far as the technology investment strategy of China is concerned since falling share prices might hinder companies from raising funds either through public offerings or fundraising.
