Chinese markets lose $2.4tn as AI race anxiety hits tech stocks

STAR 50 index plunges 40% since June on weak profits, US restrictions and sluggish consumer demand

By LineZotpaper AI staff

Published27 October 2026

Updated27 October 2026

Read Time3 min

Sources2 outlets

Illustration: Chinese markets lose $2.4tn as AI race anxiety hits tech stocks

Chinese stock markets have lost $2.4tn since May, according to Bloomberg, as anxiety over the country's race with the United States to dominate artificial intelligence triggers a broad sell-off in technology shares.

The STAR 50 Index, which tracks technology and innovation companies on the Shanghai stock exchange, has plunged 40% since June, and indexes of major companies have dropped by about 20% over the same period. AI stocks account for more than 40% of stock market value in China and Hong Kong, according to Goldman Sachs, meaning falls in the sector spread across the whole market.

Dan Wang, China director of the Eurasia Group, described a “general anxiety” among technology companies about whether the state-backed model would work. “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,” she said.

Beijing has invested heavily in AI, including a 60bn yuan state-backed fund that began pumping money into domestic developers this month. But Chinese consumers have been reluctant to spend, and many tech companies struggle to turn a profit. The government has doubled down on robotics, or “embodied AI”, as a way to deploy the technology across society and address an ageing population and shrinking workforce. Demand, however, comes mainly from government agencies and research institutions, not consumers, and products are still too expensive and impractical for home use. Shares in Unitree, China’s leading robot-maker, have halved since they started trading in August.

US restrictions have added to the pressure. The US has banned humanoid robots from China, citing national security risks, and is believed to be considering a ban on Chinese components in data centres. China relies heavily on exports, and restrictions in the US hurt domestic companies that struggle to sell enough at home.

Globally, the AI boom is expected to last at least another year. On Monday, US AI company Anthropic, maker of the chatbot Claude, filed paperwork for a planned IPO that could be the biggest stock market debut of all time, expected to bring in as much as $100bn. China has no such blockbuster IPOs on the horizon.

Policymakers are under pressure to introduce stimulus, but none are expected during a politically sensitive period. Top Chinese Communist Party officials are gathering this week for the fifth plenum, which will lay groundwork for next year’s 21st Party Congress, expected to confirm Xi Jinping for a fourth term as leader. Wang called any stimulus measure “high risk”, saying: “What if it doesn’t work out? Then whoever came up with that policy, that guy would be held accountable.”

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Analysis

Why This Matters

Chinese AI and robotics stocks now make up more than 40% of China’s and Hong Kong’s market value, so the sell-off is a countrywide market event, not a niche tech correction.
The losses raise questions about whether China’s state-backed model can turn AI investment into profits without stronger consumer demand.
US restrictions on Chinese technology are tightening, and could deepen further if Washington follows through on a reported ban on Chinese components in data centres.

Background

China and the United States have been competing to lead the development of artificial intelligence, and Beijing has made AI, robotics and “embodied AI” central to its technology strategy. The government has set up state funding and encouraged domestic investment, including new restrictions on overseas investment that take effect from 1 December. The current sell-off comes as Chinese consumers remain cautious about spending, and as tech companies face thin margins and the threat of more US export controls.

What to Watch

Whether the fifth plenum or the run-up to next year’s 21st Party Congress produces any unexpected policy signal on the economy or markets.
Whether the US moves from banning humanoid robots to banning Chinese components in data centres, which would add another layer of pressure on Chinese exporters.
Whether any Chinese AI or robotics company can show a path to consumer revenue, and whether further state funding changes investor sentiment.

Sources

Chinese markets lose trillions as race for AI supremacy with US takes its toll · The Guardian
Chinese markets lose trillions as race for AI supremacy with US takes its toll · The Guardian

Checked

12 claims in this story checked against 1 source: 11 supported.

Show each claim

SupportedChinese stock markets lost $2.4tn since May, according to Bloomberg.World news | The Guardian: “The precipitous drop has wiped out $2.4tn from the Chinese stock market since May, according to Bloomberg.”
Partly supportedAnxiety over China’s AI race with the US triggered a broad sell-off in technology shares.World news | The Guardian: “Trillions of dollars have been wiped from China’s stock markets in recent months amid increasing anxiety about the future of artificial intelligence, as Beijing races against the United States for dominance in the sector.”
SupportedThe STAR 50 Index plunged 40% since June.World news | The Guardian: “The STAR 50 Index, which tracks technology and innovation companies on the Shanghai stock exchange, has plunged 40% since June.”
SupportedOther indexes of major companies dropped by about 20% over the same period.World news | The Guardian: “Other indexes of major companies dropped by about 20% over the same time period.”
SupportedAI stocks account for more than 40% of stock market value in China and Hong Kong, according to Goldman Sachs.World news | The Guardian: “AI stocks account for over 40% of the stock market value in China and Hong Kong, according to Goldman Sachs”
SupportedWang said: “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.”World news | The Guardian: ““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, the China director for the Eurasia Group.”
SupportedWang described a “general anxiety” among technology companies about whether the state-backed model would work.World news | The Guardian: “She said that there was a “general anxiety” among technology companies about whether or not the state-backed model would work in the face of weak consumer demand.”
SupportedA 60bn yuan state-backed AI fund began pumping money into domestic developers this month.World news | The Guardian: “The Chinese government has invested heavily into AI, including a 60bn yuan state-backed AI investment fund which started pumping money into domestic developers this month.”
SupportedThe US has banned humanoid robots from China, citing national security risks.World news | The Guardian: “The US has banned humanoid robots from China , citing national security risks”
SupportedAnthropic filed paperwork ahead of a planned IPO that could be the biggest stock market debut of all time and is expected to bring in as much as $100bn.World news | The Guardian: “On Monday, US AI company Anthropic, which makes the chatbot Claude, filed paperwork ahead of a planned IPO that could be the biggest stock market debuts of all time. The company is expected to bring in as much as $100bn.”
SupportedWang called any stimulus measure “high risk”.World news | The Guardian: “Any stimulus measure would be “high risk”, Wang said.”
SupportedWang said: “What if it doesn’t work out? Then whoever came up with that policy, that guy would be held accountable.”World news | The Guardian: ““What if it doesn’t work out? Then whoever came up with that policy, that guy would be held accountable”.”