China’s AI stock sell-off: what it means for the global tech boom

China's STAR 50 Index has fallen over 40 percent in four months, erasing about US$480 billion in market value, raising questions about whether the country's AI stock rally outpaced earnings fundamentals. Analysts say the sell-off reflects a repricing of expectations and scrutiny of monetisation and profitability, though AI-related stocks still account for roughly 42 percent of market capitalisation across mainland and Hong Kong-listed shares. Concerns include intense competition squeezing margins, geopolitical restrictions on chip access, and difficulty monetising open-weight models. The downturn may complicate fundraising for cash-burning firms, but strategically important companies retain state support, and government-backed funds, bank lending, and bonds reduce dependence on equity markets. Analysts caution against drawing direct parallels to US markets, where tech giants have stronger revenue bases, while noting the sell-off signals how quickly sentiment can reverse.