China’s AI bubble burst left the STAR 50 down 40% from its July high, wiping out about $480 billion in market value over roughly four months. For investors in China AI and chip stocks, the turn erased a summer rally and pushed the market back under pressure.
Dong Baozhen, a Beijing-based fund manager, put the mood bluntly: “The stock market later evolved into a speculative crazy bull. And now we see the bubble bursting.” His warning landed after a run that sent the STAR 50 sharply higher before the reversal took hold.
STAR 50 and KSTR losses
The damage spread beyond the index itself. The KraneShares China Technology & Semiconductor STAR 50 Index ETF fell 42.63% from the June 30 close through noon Oct. 28, traded at $18.56, and was 0.27% lower for the year after the summer rally was erased. In the past month alone, KSTR lost 21.02%.
Several of the names tied to the index took heavy hits. MetaX and Moore Threads have roughly halved since July. Zhongji Innolight and Eoptolink trade about 60% below their summer highs, and CXMT fell more than 25% in the month before Oct. 27. Unitree has lost about half its value since its August debut.
Goldman Sachs and Nasdaq 100
Goldman Sachs estimates that AI stocks account for 42% of China’s market value and 57% of its trading, which makes the selloff broader than a narrow chip-stock slide. Trending Topics said the STAR 50’s price-to-earnings ratio once stood near 250 and still sits around 100 after the crash, versus about 30 for the Nasdaq 100.
The contrast with the U.S. is just as stark. The Invesco QQQ Trust slid 1.9% over the same window, was down 2.97% over the past month, and remained up 17.6% year to date, while NVIDIA already represents 7.6% of QQQ. That leaves U.S. investors with exposure to AI strength even as China’s AI-themed index has already given back its summer rally.
Morgan Stanley and offshore Chinese stocks
Morgan Stanley forecasts that offshore Chinese stocks will fall another 10% to 15% before bottoming. That keeps the burden on investors who chased the run-up and on anyone holding funds tied to the STAR 50 through KSTR, because the drawdown is no longer just a headline number.
Will the STAR 50 keep falling, or has the selling already exhausted itself? The answer will decide whether this looks like a violent correction or the first leg of a deeper reset in China’s AI trade.
