China’s stock market is discovering that even an artificial intelligence boom cannot keep investors excited forever. After months of optimism around technology, hopes of government support and a potential economic revival, the country’s biggest stocks are facing a sharp reversal.
The CSI 300 Index, which tracks 300 major companies listed in Shanghai and Shenzhen, fell as much as 1.6 per cent on Thursday (October 22). The decline took its losses from a June peak to around 20 per cent, putting the benchmark in bear-market territory. A 20 per cent fall from a recent peak is the widely used threshold for a technical bear market.
The sell-off has also spread to Hong Kong-listed Chinese companies. A gauge tracking major stocks in the city dropped as much as 2.9 per cent, reflecting the growing nervousness surrounding China’s economic outlook and technology shares.
The trouble is not coming from a single direction. Investors are reassessing the prospects of artificial intelligence (AI) stocks, questioning the strength of domestic demand and waiting for clearer signs of policy support.
AI Euphoria Gives Way To Hard Questions
Technology stocks had been among the biggest beneficiaries of investor enthusiasm earlier this year. Expectations of Chinese technological breakthroughs and Beijing’s push to strengthen the country’s AI industry helped drive money into the sector.
But the mood has changed.
Investors are now looking more closely at company valuations, earnings prospects and the returns businesses can generate from the AI boom. When expectations rise faster than profits, even a promising industry can become vulnerable to a sharp correction.
The weakness is not limited to China. A wider global sell-off in AI-linked stocks has weighed on markets across Asia. Chinese equities have faced additional pressure as investors reconsider whether the sector’s earlier gains were justified by its business prospects.
This shift matters for China because its technology companies increasingly rely on equity markets to raise money for expansion. A prolonged slump could make fundraising more difficult and put pressure on companies seeking capital to develop new products and technologies.
