China's AI Stock Slump Has Wiped Out $2.4tn Since May
Shanghai's STAR 50 index is down 40% since June, as weak profits and the threat of US tech bans weigh on China's AI-driven stock market.
The STAR 50 Index, which tracks technology and innovation companies listed in Shanghai, has fallen 40% since June. Other indexes of major Chinese companies have dropped about 20% over the same period. According to Bloomberg, that adds up to $2.4tn wiped from the Chinese stock market since May.
Goldman Sachs estimates that AI stocks account for more than 40% of market value in China and Hong Kong, so a dent in their prices spreads across the whole domestic market.
Weak profits, US restrictions
Beijing has backed the sector heavily, including a 60bn yuan state-supported AI investment fund that began putting money into domestic developers this month. Chinese consumers, however, have been reluctant to spend, and many technology companies struggle to turn a profit.
A second worry is that the US and other Western countries may widen their bans on Chinese technology. The US has already banned humanoid robots from China, citing national security risks, and is thought to be weighing a ban on Chinese components in data centres. Because China relies heavily on exports, such limits hurt companies that cannot sell enough at home.
"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," said Dan Wang, China director at the Eurasia Group.
Robots under pressure
Beijing has put robotics, also called embodied AI, at the centre of its plan to spread the technology through society, and sees it as an answer to an ageing population and a shrinking workforce. Demand, though, comes mostly from government agencies and research institutions. For households the products are still too expensive and not yet practical. Shares in Unitree, the country's leading robot maker, have halved since they began trading in August.
China has also restricted overseas investment in recent months, with more rules taking effect on 1 December, but that has not drawn more money into domestic markets.
No stimulus expected
On Monday, Anthropic filed paperwork for an IPO that could be among the biggest stock market debuts ever. China has no comparable listing on the horizon.
The Communist Party's top officials meet this week for the fifth plenum, which prepares next year's 21st Party Congress. No stimulus measures are expected in that politically sensitive period. Wang called any such step "high risk": if it did not work out, she said, whoever proposed it would be held accountable.
Source: The Guardian