Chinese stocks turn biggest losers as global AI trade stumbles (theedgemalaysia.com)

Chinese technology stocks are struggling significantly in the wake of a global slowdown in the artificial intelligence (AI) sector, marking a substantial setback for Beijing's ambitions to dominate this field. The Nasdaq-style Star50 Index has plummeted nearly 40% this half-year, accompanied by major losses from key chipmakers like MetaX Integrated Circuits and Moore Threads, which have each lost about half their market value. In a sharp reversal from the optimism earlier this year, when strong state support and perceived technological advancements had driven a 75% surge in the index, the recent downturn reflects growing skepticism about future demand and earnings prospects. This decline poses serious challenges for Chinese firms that heavily rely on equity financing, as prolonged weakness could hinder Beijing's AI aspirations. With estimated outflows of 90 billion yuan ($13.5 billion) in the third quarter, foreign investment enthusiasm has dwindled, reversing previous inflows. While the government is discussing stabilization measures, including potentially ramping up stock purchases, analysts warn that the high valuations of AI stocks, still trading at over 40 times forward earnings, make recovery uncertain. Without significant financial reforms or clear improvements in the market environment, the path towards realizing China's AI goals may become increasingly difficult.