AI summary
Summary of article:
China’s AI concept stocks have declined due to overvaluation and demand concerns. The Kechuang 50 has fallen 40% from its July high, and its market value has declined significantly. Investors are worried about the risk of continued decline after the bubble bursts.
While global technology stocks are floundering, demand for AI and concerns about China’s export restrictions have burst China’s AI bubble. The local Science and Technology Innovation 50 index, which is dominated by AI stocks, has retreated 40% from its July high, and outsiders are worried that stock prices may continue to fall.
Reuters reported that the share prices of the Science and Technology 50 and major Chinese chip makers have fallen by 40% in less than four months, and their market value has dropped by about US$480 billion. Robot maker Yushu Technology’s share price has halved since its listing in August. Changxin Storage has fallen 25% in the last month. The share prices of chip makers Maxi and Moore Thread have both been cut in half since July this year, whereas their share prices were up 700% and 400% respectively when they went public last year.
Fund manager Dong Baozhen said: “The stock market has turned into a crazy bull market for speculation, and now we are seeing the bubble burst.”
Chinese AI stocks have surged before, outperforming Western and other Asian markets. Now the situation has reversed and the decline has been less than before.US stocks Critically, the Nasdaq is currently only 6% off its high from three weeks ago.
The retrospective price-to-earnings ratio of the Science and Technology 50 is now nearly 100 times. Although this is less than about 250x at the high point, because the price-to-earnings ratio of the Nasdaq is only 30x, investors are worried that the S&T 50 will continue to fall before getting better.
AI stocks fell and retail investors suffered huge losses. A small business owner in Hainan province said government support for companies like Yushu Technology gave him the courage to buy when the stock market boomed. Now he and his friends are facing losses.
Investors are dissatisfied with the decline in investment themes favored by Beijing authorities, and many are turning to defensive assets, which could reduce stock financing for the technology industry. Authorities’ policy of encouraging people to buy stocks to support the AI craze may be affected. Hong Hao, chief investment officer of Lotus Asset Management, said: “Today’s situation will force many companies to abandon listings.”
Summary FAQ
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Mainly due to insufficient actual demand for AI and market concerns about the weak impact of China’s export restrictions and policy support. When valuations were previously inflated too high, stock prices quickly retreated as growth expectations diminished.
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The Kechuang 50 has retreated nearly 40% from its July high, and its market value has dropped nearly US$480 billion in less than 4 months; Yushu Technology’s share price has halved since its listing, Changxin Storage fell 25% month-on-month, and Muxi and Moore Thread also fell by almost half.
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Retail investors and investors chasing wealth may suffer greater losses, and investors may turn to defensive assets and reduce technology financing, which will also affect companies’ willingness to list. The market is also worried that the relevant policy narrative will fail, which will subsequently slow down capital investment.
