Has China’s AI bubble burst? What this means for the global tech boom

While the downturn has raised concerns over valuations and profitability, analysts say it does not necessarily spell trouble for China’s broader AI ambitions and the global market.

A sharp sell-off in Chinese AI and technology stocks has raised questions over lofty valuations and the sector's ability to deliver sustainable profits. Pictured is a visitor at the World Artificial Intelligence Conference in Shanghai, China, on Jul 26, 2025. (Photo: Reuters/Go Nakamura) New: You can now listen to articles. This audio is generated by an AI tool.

Lee Gim Siong 29 Oct 2026 05:53PM Bookmark Bookmark Share WhatsApp Telegram Facebook Twitter Email LinkedIn Set CNA as your preferred source on Google Add CNA as a trusted source to help Google better understand and surface our content in search results. Read a summary of this article on FAST. Get bite-sized news via a newcards interface. Give it a try. Click here to return to FAST Tap here to return to FAST FAST BEIJING: Has China’s artificial intelligence bubble finally burst? A once-soaring rally in Chinese AI stocks has lost much of its momentum, with a sharp sell-off raising questions about whether enthusiasm for the technology has pushed share prices beyond what companies' earnings could justify.

But while the decline has fuelled debate over whether an AI investment bubble is deflating, analysts told CNA that falling share prices do not necessarily signal a setback for China’s broader AI ambitions - or suggest that other markets are headed for a similar correction.

As of Thursday (Oct 29), China’s STAR 50 Index, which tracks 50 major tech and innovation companies on the Shanghai Stock Exchange, had fallen more than 40 per cent over four months, wiping out some US$480 billion in market value.

The scale of the decline has brought renewed scrutiny as to whether heavy spending on AI can translate into higher profits, and what the reversal means for China’s tech ambitions and the wider global AI investment boom.

CNA Games Guess Word Crack the word, one row at a time Buzzword Create words using the given letters Mini Sudoku Tiny puzzle, mighty brain teaser Mini Crossword Small grid, big challenge Word Search Spot as many words as you can Show More Show Less “The sell-off appears to be primarily a repricing of expectations, but it is also prompting more scrutiny of monetisation, profitability and capital efficiency,” said Stephen Wong, an executive committee member of the Greater China Chapter of the Chartered Alternative Investment Analyst (CAIA) Association, a US-based global professional body for the alternative investment industry.

While falling share prices could make it harder for some Chinese firms to raise funds, the downturn is unlikely to derail Beijing's broader AI ambitions, analysts said - which continue to benefit from government support.

The sell-off follows a roughly two-year rally in Chinese equities, fuelled in part by enthusiasm for AI that sent technology shares soaring, particularly in sectors such as semiconductors and robotics.

As of Oct 26, the STAR 50 was still trading at around 100 times the combined earnings of its constituent companies over the past 12 months - down from a peak of nearly 250 times, according to Reuters.

That suggests that investors are still paying a substantial premium for future growth - leaving shares vulnerable if earnings fail to meet expectations.

Kelvin Wong, senior market analyst at online trading platform OANDA, said Chinese equities have been particularly exposed to a reversal in investor sentiment.