Beijing is investing billions to make the country technologically independent. But doubts are growing on the stock markets as to whether the high investments will pay off.
There were significant losses on the Chinese stock exchanges in October, especially in technology stocks.
The price decline shows that both private and institutional investors in China are increasingly skeptical about whether the boom in AI companies is sustainable.
The reason for this skepticism is the fact that the business models of tech companies such as Unitree and Baidu have not yet shown any concrete success.
Nevertheless, analysts consider AI to be a key investment topic in China in the medium term.
Shanghai. When the Chinese start-up Deepseek presented its own language model at the beginning of 2025, it was seen as a signal to Silicon Valley: the lead of the US companies based there in artificial intelligence (AI) is not unassailable. Numerous tech companies are now developing their own AI models, while China's government is pushing ahead with the development of the AI industry with billions in subsidies.
This growth is no longer evident on the domestic financial markets. In October, China's leading index CSI 300 fell by 8.5 percent, the most in a decade. The CSI A500, which includes even more companies on the mainland stock exchanges, lost eleven percent. The Shanghai tech index STAR 50 even fell by more than 20 percent. How does this fit with the state-led AI boom?
The shares of the robot manufacturer Unitree recorded a 52 percent price loss within the first eight weeks after their IPO.
Scarlett Liu, equity expert for the Asia-Pacific region at the French bank BNP Paribas in Hong Kong, sees disappointing business figures from some leading technology companies as the cause of the share price losses. In addition, there are increasing doubts about the amount of AI investments made by large US corporations and “their profitability,” she told the Handelsblatt on Monday.
The warnings about the bursting of an AI bubble unsettled Chinese private investors, on whose behavior a lot depends on the Chinese stock market. Domestic funds also withdrew funds.
The government wants to encourage private investors to buy
Some values have recently recovered following an intervention by the central bank PBOC. This made more than 100 billion yuan, the equivalent of around 13.5 billion euros, available for swaps with financial institutions and also strengthened a refinancing program for the purchases and repurchases of shares. This is intended to support the capital markets. They play a key role in China's state industrial policy for funding the key tech industries the state is promoting under the current five-year plan, including AI and robotics.
However, the Chinese stock market also relies heavily on the willingness of private investors to invest in the growing domestic tech scene. The government in Beijing is promoting stocks as a form of investment in order to direct capital into sectors and at the same time encourage the population to build wealth. This is ultimately intended to stimulate weak domestic consumption. Since the collapse of the Chinese real estate market, real investment alternatives have been rare.
On the other hand, private households are facing “financial challenges” due to the weak economic situation, writes Sophia Pradels, analyst at the China think tank Merics, in a briefing on Friday. These included “ongoing economic stagnation, growing inequalities and weakening consumer confidence.”
In addition, there are unclear future prospects and sometimes uncertain business models in China's tech sectors. The shares of the robot manufacturer Unitree, which started on August 19th with a high valuation, have fluctuated greatly since then. It closed at 845 yuan on the first day of trading, fell to 405 yuan on October 15, and was trading at 716 yuan at market close on Monday.
According to experts, it is not yet clear to what extent humanoid robots, for which the Hangzhou company is known, will be used productively in households and industry. As of now, many robots are in use in research institutions, but not yet in real industries or households. Automation is only gradually taking effect here.
Contributing to Beijing's technological autonomy
Other established tech companies such as Baidu are in the difficult process of transforming their business model. Sales of the Chinese group - an AI pioneer whose search engine is widely used in China - fell by four percent in the second quarter of 2026. In particular, revenues in the traditional online advertising business fell by 19 percent. At the same time, sales of AI cloud infrastructure and GPU cloud increased sharply.
Baidu is in a similar situation to its US competitor Google: New applications such as its own AI language model Ernie are changing the search behavior of users who previously relied on the search engine. The problem: While new business is growing quickly, it cannot compensate for the decline in the old business model. At the same time, a company like Baidu must invest billions of yuan in new computing capacity, language models and skilled workers, while traditional revenue streams are shrinking.
Companies like Baidu, Tencent or Alibaba still have the structural advantage that they are active in many business areas, some from gaming to e-commerce. Many smaller AI companies that specialize more - such as iFlytek or Sensetime in speech or image processing - are less able to cross-subsidize themselves from neighboring industries.
In addition, they should switch to domestic chips and technology and replace imported products. In doing so, they are intended to contribute to Beijing's goal of technological independence. However, this is expensive for companies. Because they have to invest large amounts of money in research, development and the conversion of technical fundamentals.
A spokesman did not want to comment on rumors that the Shanghai robotics company Agibot could postpone its planned IPO until next year against this background.
Despite the turbulence, stock experts believe in the long-term prospects of Chinese tech stocks - this is mainly due to the close connection between politics, the economy and stock markets in the country. Prices have begun to recover again, says stock expert Liu. What is crucial is the “political tailwind for the substitution of foreign technologies with domestic alternatives”.
The experts at Goldman Sachs Research see it similarly in a new analysis: The institute expects a significant recovery in profits for the region and sees, among other things, artificial intelligence as a central investment topic.
