China's AI stock bubble bursts as STAR50 index plunges 40%

China's STAR50 index of AI and semiconductor stocks has plunged 40% in under four months, erasing about $480 billion in market value, as concerns over AI demand and export curbs burst a two-year rally. The crash has stalled Beijing's push for a stable "slow bull" market and threatens global tech sentiment. The selloff, which hit retail favorites like robot-maker Unitree and chipmaker CXMT, follows a speculative frenzy where AI stocks reached 42% of China's market capitalization and 57% of turnover, according to Goldman Sachs. No single trigger caused the reversal, but traders cite high valuations, tax bills, and potential US bans on Chinese equipment in data centers. The STAR50 still trades at about 100 times trailing earnings versus the Nasdaq 100's 30 times, suggesting further downside risk. The crash may slow tech fundraising and has driven investors toward defensive assets, though some analysts see buying opportunities for selective investors.