China tech stocks lose $2.4 trillion as AI spending stalls

Chinese investors have lost $2.4 trillion in market value since May as anxiety over the artificial intelligence sector deepened. The STAR 50 Index, which tracks technology and innovation companies on the Shanghai stock exchange, has fallen 40% since June. Other indexes for major companies dropped by approximately 20% over the same period.

Goldman Sachs reports that AI stocks represent over 40% of the total stock market value in China and Hong Kong. This concentration means that declines in the sector ripple across the entire domestic market. Despite heavy government investment, including a 60 billion yuan state-backed AI fund that began funding domestic developers in October, consumer spending remains weak. Many tech companies struggle to turn a profit because households are reluctant to spend on new technology.

Dan Wang, the China director for the Eurasia Group, cited thin profit margins, rising US interest rates, and soft domestic demand as primary drivers of the sell-off. She described a general anxiety among tech firms about whether state-backed models can succeed without strong consumer support. Wang noted that embodied intelligence, or robotics, is unlikely to generate mass-market profits in the near term.

The US government has banned Chinese humanoid robots citing national security risks and is considering restrictions on Chinese components in data centers. These trade barriers hurt Chinese firms that rely on exports. While Beijing promotes robotics as a solution to demographic challenges like an aging population, current demand comes mostly from government agencies and research institutions. Consumer adoption is limited because products remain too expensive and impractical for home use. Shares in Unitree, China’s leading robot maker, have halved since beginning trading in August.

Beijing has restricted overseas investment in recent months, with new regulations taking effect on December 1. These measures aim to keep capital domestic but have not yet boosted market confidence. Wang said optimism persists in AI research and satellite sectors due to long-term state support linked to military needs. Globally, the AI boom is expected to continue for at least another year.

US company Anthropic, developer of the Claude chatbot, filed paperwork on Monday for a planned initial public offering that could raise up to $100 billion. China has no comparable blockbuster IPOs scheduled. Policymakers are not expected to announce new stimulus measures during the current politically sensitive period. Top Communist Party officials are gathering this week for the fifth plenum to prepare for next year’s 21st Party Congress, where Xi Jinping is expected to secure a fourth term.

Wang warned that introducing stimulus now would be high risk because leaders would face accountability if the measures failed to stimulate growth. The next major policy window will open after the Party Congress concludes next year.