Reuters reported on the collapse of technology stocks in China due to the "AI bubble"

Chinese technology stocks have plunged 40% in less than four months, with market capitalization down by about $480 billion. This was reported by the Reuters news agency on October 26.

"The stock market has turned into a speculative mad bull. And now we see this bubble bursting," said Dong Baozhen, a Beijing—based fund manager.

According to the agency, the STAR50 index in mainland China has fallen 40% from its highs, while the broad blue-chip CSI300 index is down about 20% from its June peaks. The crash "put the brakes on a two-year rally" that began after promises of economic stimulus and weakened Beijing's efforts to create a "slow bull market."

The reasons for the sale are concerns about demand for artificial intelligence and the threat of restrictions on Chinese exports. According to Goldman Sachs, AI companies account for 42% of China's market capitalization and 57% of turnover on exchanges in mainland China and Hong Kong.

The robot manufacturer Unitree and the company CXMT, whose shares were oversubscribed by retail buyers 8 thousand times during the placement, have doubled in value since the start of trading. Shares of MetaX and Moore Threads, which jumped 700% and 400% upon entering the market, have also halved since July, the publication says.

"What is happening will stop many companies trying to enter the stock exchange," Hong Hao, managing partner of Lotus Asset Management, told the agency.

Leo Wang, a partner at Qianchuang Capital, said that an excessive focus on "technological content" leads to "the formation of a serious bubble," and fund manager Wang Zhuo of Shanghai Zhuozhu Investment Management believes that chip manufacturers and AI solution providers will eventually find themselves in a price war.

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Billionaire Ray Dalio, founder of the Bridgewater hedge fund, said on October 7 that the AI market is a "classic bubble" that could start to collapse due to rising interest rates and the need to convert assets into cash. According to him, significant amounts of borrowed funds are being raised to finance AI, while interest rates continue to rise. This may lead to a situation in which investors will have to sell assets to receive cash.