[Beijing = E-Daily Lee Myeongcheol Correspondent] Concerns over an artificial intelligence (AI) bubble have caused the global correction in AI and semiconductor stocks to spill over into China. Related Chinese stocks have fallen by about 40% from their peak, and market capitalization alone has evaporated by several hundred trillion won. However, some observers within China are suggesting that the market correction is coming to an end and expressing optimism about a rebound.

Reuters reported on the 26th (local time) that amid volatility in global tech stocks, the sharp collapse in the valuations of Chinese tech companies has made the tech stock crash a reality.

According to the Shanghai Stock Exchange, the Star 50 Index—comprising leading Chinese AI and semiconductor companies—closed at 1,315.50 the previous day. This represents a decline of approximately 41.7% from its year-to-date high of 2,255.25 on July 1. Reuters noted that approximately $480 billion (about 636 trillion won) in market capitalization has evaporated during this downturn.

China’s leading benchmark index, the CSI 300, has also fallen by about 20% from its peak in June. Analysts note that the correction in the Chinese stock market is much more severe compared to the U.S. Nasdaq, which has fallen by only 6% since hitting an all-time high three weeks ago.

In particular, the slump among technology companies—which have recently gone public and emerged as large-cap stocks—is especially pronounced.

Changxin Memory Technology (CXMT), China’s leading DRAM manufacturer, saw its market capitalization swell to 4.2 trillion yuan (approximately 834 trillion won) at one point in August, following its listing on the STAR Market (a market dedicated to Chinese technology stocks) in July of this year. However, as of the previous day, it stood at approximately 2.9 trillion yuan (about 576 trillion won), meaning 1.3 trillion yuan (about 258 trillion won) had evaporated in just over two months.

Unitree, a Chinese robotics company that listed on the STAR Market in August, saw its market capitalization rise to 341.8 billion yuan (approximately 68 trillion won) on its first day of trading. As of the previous day, its market capitalization (271.8 billion yuan) had fallen by about 20.5 percent. Even this figure represents a level where the stock price has recently risen significantly.

Chinese semiconductor companies MetaX and MooreThread also surged 700% and 400%, respectively, compared to their initial public offering prices on their first day of trading last year, but their stock prices have halved since July.

Reuters reported, “The stock market rally that had lasted for about two years came to a sudden halt following the Chinese government’s promises of economic stimulus,” adding, “This also poured cold water on the Chinese government’s efforts to channel household savings into the stock market to raise funds needed for the rapid growth of the AI industry.”

Analysts attribute the sharp decline in Chinese tech stocks to a combination of factors, including high stock prices, tax burdens, and concerns over restrictions on the use of Chinese-made equipment in the U.S. and other countries. The decline in tech stocks is also weighing on the Chinese stock market as a whole. According to Goldman Sachs, AI-related stocks account for 42% of the total market capitalization and 57% of trading volume on the mainland Chinese and Hong Kong stock markets.

Some investment industry insiders pointed out that the overheating centered on tech stocks has had a negative impact on the structure of the stock market.

Leo Wang, a partner at Beijing-based Qianchuang Capital, told Reuters, “Excessively increasing the weight of tech companies’ market capitalization in major indices diverts capital from its natural flow and even causes distortions,” adding, “Serious bubbles have formed in some sectors, while capital has fled en masse from others.”

Different perspectives are also emerging within China. Some analysts argue that the AI bubble has not burst, but rather that this is a correction following excessive stock price gains, and that a rebound could occur soon.

China’s Huatai Securities analyzed, “From a short-term perspective, the market is currently in an oversold phase, and historically, such periods have been followed by a rebound,” adding, “Sectors such as humanoid robots and AI applications are seeing increasing profitability.”

In a report released the previous day, China’s Taijiu Fund predicted, “Nearly every supply chain in the AI industry is experiencing shortages and price increases, and related companies are seeing accelerated improvements in orders and earnings,” adding, “Investor sentiment is expected to bottom out as the stock market has overreacted to negative news.”