China's AI stock bubble bursts, wiping out $480 billion in market value

China's STAR50 tech index lost 40% of its value in four months, erasing $480 billion in market capitalization due to investor fears of an overheated artificial intelligence sector lacking profits, Reuters reported. The index peaked in June 2026 on state subsidies and speculative optimism, but a selloff hit chipmakers, robotics firms, and optical component makers. Its P/E ratio fell from near 250 to about 100, while the broader CSI300 dropped nearly 20% from June peaks. Bridgewater's Ray Dalio had warned of a classic bubble. Retail investors bore the brunt as AI-related firms comprise 42% of China's market cap and 57% of trading volume. Some analysts see the correction as separating viable firms from speculative projects.