Chinese AI companies preparing listings, from DeepSeek to Noetix, now face a market that has cut the value of AI chip, optical and model stocks sharply within four months.
China’s CSI 300 index of the largest Shanghai and Shenzhen stocks closed 1.8% lower on Thursday, October 22, leaving it 20% below its June high and in a bear market, according to a Bloomberg report republished by The Edge Malaysia. Chinese equities have lost about US$2.4 trillion in market value since a peak in May, the report said.
The selloff centered on the AI trade that had driven the rally. Investing.com reported that investors are reassessing whether heavy spending on AI infrastructure will produce enough return, and that this is the CSI 300’s first bear market since the pandemic selloff of 2020. The index was heading for its tenth straight weekly loss.
Hong Kong took the larger hit. The Hang Seng Tech Index closed down 5.03%, according to Sina Finance, breaking through 3,900 and then 3,800 points to its lowest level since September 2024. The Hang Seng Index fell 3.03% to 22,934.68, after dropping as much as 772 points during the day, and the Hang Seng China Enterprises Index lost 3.2%. Hong Kong turnover reached HK$256 billion, The Standard reported.
AI hardware and model stocks led the decline
On the mainland, the Shanghai Composite fell 1.48% to 3,658.03, the Shenzhen Component index dropped 2.96% to 11,357.32 and the startup-focused ChiNext index lost 4.37% to 2,576.90, the 21st Century Business Herald reported. It said the three leading optical-module makers, whose components link AI servers in data centers, each fell more than 8%.
Nearly 5,000 stocks declined and turnover reached RMB1.54 trillion, The Paper reported, with optical communications, semiconductors and electronic components among the hardest-hit sectors. Humanoid robot and telecom stocks rose against the trend.
In Hong Kong, listed AI model developers fell sharply during the session: Z.AI dropped 9.4% and MiniMax 6.9%, while chipmaker SMIC lost 6.1%, Investing.com reported. Hua Hong Semiconductor fell 9.5% and Lenovo nearly 11%, making them the worst performers on the Hang Seng Index, according to The Standard. Alibaba closed 6.1% lower and Tencent 2.9% lower.
The damage has built over months. The STAR 50 index of Shanghai tech shares has fallen nearly 40% over the past half year, and ChiNext has lost 36%. Investing.com said GPU makers MetaX and Moore Threads have each lost about half their value, memory maker CXMT is 27% below its post-listing peak, and Unitree has halved from its August high.
Regulation and tax added to AI doubts
Several other pressures hit at once. Alibaba fell after the State Administration for Market Regulation met major e-commerce platforms, including Alibaba, JD.com, PDD, Xiaohongshu, Kuaishou, ByteDance and Vipshop, and urged them to improve product quality and consumer protection, Business Today reported. A Bank of East Asia strategist told Dimsum Daily that October 22 was the filing deadline for tax on offshore trust assets, and The Standard attributed part of the selling to rumors that mainland tycoons might sell shares to pay taxes.
Hopes for a large stimulus package have also faded. The South China Morning Post, which is owned by Alibaba, reported that the chance of strong support from Beijing had shrunk. Bloomberg reported that authorities have relied mainly on buying by state-backed funds rather than broad fiscal spending.
State-backed buying is the support to watch
Turnover in nine exchange-traded funds that state-backed investors use for market support reached RMB52 billion by 2:45 p.m., the most since October 15, according to the Bloomberg report. Bloomberg Intelligence analysts said those investors may need to buy more, and for longer, than in their two most recent interventions. Margin debt has fallen to levels last seen in late 2025, and daily onshore turnover is near a 15-month low, the report added. The Hang Seng China Enterprises Index and the CSI 300 are each down more than 10% this year, among the weakest of the world’s major equity benchmarks.
For AI companies, the falling prices of listed peers set the reference point for private valuations and new listings. The next markers are whether state-backed buying grows enough to stop the decline, and what the third-quarter results of China’s AI chip and hardware makers show about demand.