The global AI trade is bleeding, and Chinese tech is the patient on the table. The Nasdaq-style Star50 index is down nearly 40% in the first half of the year, making it the world's worst-performing major tech gauge. It’s a brutal reversal for a sector that was the darling of the Asia-Pacific AI boom just months ago. The damage is concentrated. MetaX Integrated Circuits and Moore Threads, both labeled the 'Chinese Nvidia' at various points, have shed around 50% of their value. Moore Threads, which surged 500% on its December debut, has fallen from a high of 942 CNY to 327 CNY. The hardware-focused ChiNext index isn't far behind, down 36% in the same period.
The money is leaving fast. Between April and June, the Star50 outperformed South Korea's KOSPI, surging 75% and trading at a frothy 80 times forward earnings at its June 30 peak. Now, the unwind is violent. Bloomberg data shows outflows from the Shanghai-HK Stock Connect — the bridge for foreign investors — totaled $13.5 billion in the third quarter. That’s the biggest quarterly exit in a year. It effectively erased more than half of the inflows seen during the April-June frenzy. Compare the current environment to the KOSPI, which trades at less than five times forward earnings post-meltdown, versus the Star50 still sitting at 40 times. The Nasdaq 100 is at 21 times.
Gavekal Capital warns that this isn't just a correction; it’s a threat to China's AI ambitions. If this weakness extends for another six months, fundraising becomes nearly impossible. The market is simply unimpressed with the technological progress relative to the price tag. Companies are relying heavily on equity financing to fund growth, and that door is slamming shut. CXMT Corp., which triggered a global sell-off this week after claiming progress on memory chips rivaling Samsung and SK Hynix, is down 27% from its post-listing high. Yushu Technology has halved from its August high.
The IPO window remains open, but the quality of the trade is changing. Chinese onshore IPOs have fetched $37 billion this year, the highest in three years, with a third of those funds coming from tech firms. Yet, analysts point out this is a technical pullback, not a value play. For many high-potential tech names, true value won't emerge until they fall another 30% to 50%. The market is demanding proof, not promises.