Chinese Markets Lose Trillions as AI Race with US Intensifies

China's stock market has lost $2.4 trillion since May. The STAR 50 Index, which includes technology and innovative companies on the Shanghai Stock Exchange, has fallen by 40% since June, while indices of large companies have dropped by approximately 20%. Shares of AI-related companies account for over 40% of the market value in China and Hong Kong.

The decline is attributed to weak domestic demand and companies' struggles to turn a profit. Beijing is actively funding AI development, but consumers are slow to adopt technological products. An additional risk comes from potential new US restrictions on Chinese technologies: Washington has already banned the supply of humanoid robots from China, citing national security threats, and may limit the use of Chinese components in data centers.

Robotics remains one of the key focus areas of China's AI strategy, but its products are still too expensive and impractical for most households. Shares of robotics manufacturer Unitree have halved since their trading debut in August. According to Dan Wang, China Director at Eurasia Group, companies are also concerned about weak profit margins, rising US interest rates, and the industry's dependence on government support.