The sharp decline in the shares of artificial intelligence and semiconductor companies in China weakened the optimism for technology investments.
The STAR50 index, which is dominated by artificial intelligence and semiconductor companies, has fallen 40 percent in less than four months since its peak in July. Approximately $480 billion in market value was erased in this process.
STAR50 DECREASED BY 40 PERCENT
According to Reuters, high company valuations, concerns about artificial intelligence demand and China's export restrictions on technology products were effective in the sales wave.
The CSI300 index, which covers China's large companies, has also lost approximately 20 percent of its value since its peak in June.
The decline in Chinese markets was steeper than the decline in US technology stocks. While the Nasdaq index decreased by 6 percent compared to the record level it reached three weeks ago, the high weight of artificial intelligence stocks in the stock market in China increased the effect of the sales wave.
WEIGHT OF ARTIFICIAL INTELLIGENCE SHARES IN THE MARKET IS 42 PERCENT
According to Goldman Sachs data, artificial intelligence shares constitute 42 percent of the total market value of group A and H shares traded in mainland China and Hong Kong.
The share of these shares in the total transaction volume reaches 57 percent.
It is stated that the decline in artificial intelligence companies, especially in the market where small investors dominate, affects a wide range of investors.
PUBLIC OFFERINGS ARE ALSO UNDER PRESSURE
The sales wave also affected technology companies, which have attracted great interest from investors in recent months.
Shares of robot manufacturer Unitree have lost nearly 50 percent of their value since its IPO in August.
The demand from individual investors in the company's public offering reached approximately 8 thousand times the shares offered for sale.
Shares of chip maker CXMT have fallen by more than a quarter in the last month, while shares of MetaX Integrated Circuits and Moore Threads Technology have lost nearly half their value since their peaks in July.
LOSSES ARE APPROACHING 60 PERCENT IN SOME COMPANIES
Shares of Zhongji Innolight and Eoptolink Technology, which produce optical components used in artificial intelligence technologies, also fell approximately 60 percent from their peaks in June and July.
The steps taken by the USA to prevent these companies from supplying products to American data centers were also effective in the decline in stocks.
Hong Hao, manager of Hong Kong-based Lotus Asset Management, said the selling wave could halt the IPO plans of many technology companies.
VALUATIONS STILL ABOVE NASDAQ
Despite the sharp decline in technology stocks in China, valuations remain at high levels.
The price/earnings ratio, calculated based on the profits of the last 12 months of the STAR50 index, decreased to 100 from its peak of approximately 250.
The same rate in the Nasdaq 100 index is around 30.
This difference indicates that valuation pressure on Chinese technology stocks has not completely disappeared.
BEIJING TAKES MEASURES AGAINST SPECULATIVE TRANSACTIONS
While trying to provide a more stable outlook in the stock market, the Beijing administration has introduced new measures regarding leveraged transactions and high-frequency trading.
It was stated that state-supported investors also tried to limit price movements by selling shares during periods of rise.
Despite this, the sharp sell-off that followed the rise accelerated by expectations for artificial intelligence investments also makes the goal of directing savers to the stock market difficult.
INVESTORS EXPECT A LOWER VALUATION
Some investors think that the decline may not be entirely negative for market reforms in the long run.
According to HSBC research, funds investing in Asian markets largely maintain their weight in Chinese stocks.
Goldman Sachs also keeps some Chinese artificial intelligence companies, including Innolight and CXMT, on its current investment recommendation list.
Some investors in mainland China are waiting for valuations to decline further or for new opportunities to emerge in different sectors before starting to buy again.
Shanghai-based Zhuozhu Investment Management manager Wang Zhuo stated that chip manufacturers and artificial intelligence suppliers will face price competition like other Chinese manufacturers, and said that no sector is exempt from this pressure.
