China's AI Stock Bubble Bursts as Valuations Collapse

Chinese tech stocks have crashed as AI-related valuations collapse, with AI stocks now comprising 42% of China's market capitalization and 57% of trading turnover. The bubble burst follows a speculative rally, leaving many small investors nursing losses. No single trigger caused the crash, but traders cite high prices, tax bills, and threats of US bans on Chinese equipment in data centers. Retail favorites like Unitree have fallen sharply, and the STAR50 index trades at 100 times earnings, down from nearly 250, compared to the Nasdaq 100's 30 times. Authorities had tried to curb volatility through leverage restrictions and state-backed selling into rallies. Some analysts see buying opportunities, while others warn of price wars ahead. The selloff may slow tech listings and push investors toward defensive assets.