China AI Index Plummets 40% as US AI Stocks Gain Momentum

China's AI-related Star 50 index has shed roughly 40% of its market value over the past four months, erasing an estimated $480 billion in shareholder wealth, according to Reuters journalist Tom Westbrook. The decline contrasts with a modest 6% drop on the Nasdaq.

"Some of the most popular AI stocks — the suppliers of optical equipment to data centres, chipmakers, companies that were seen as providing the nuts and bolts of the AI revolution — have seen their share prices collapse by 50, 60, or 70 per cent in the last few months," Westbrook said.

He attributed the sell-off to concerns over Chinese tax liabilities, expectations that the sector was priced for an unrealistically strong global demand, and growing worries that U.S. buyers may avoid Chinese equipment. Retail investors were particularly affected, with companies such as robotics firm Unitree experiencing sharp price drops after being heavily oversubscribed at their listings.

In contrast, U.S. AI equities continued to rise. The Nasdaq led gains as investors awaited a Federal Reserve decision and earnings reports from major AI players. Briefing.com analyst Patrick O’Hare described the market move as a "buy-the-dip" trade driven by AI-related stocks, especially semiconductors and large cloud providers.

Anthropic, the parent of Claude AI, reported a 1,300% year-on-year revenue increase for the first half of the year but warned of significant capital expenditures. Broadcom announced a $63 billion financing arrangement with Citi, Blackstone and Morgan Stanley to expand capacity for Anthropic, lifting its shares by four percent.

South Korean chipmaker SK hynix posted a 632% rise in third-quarter operating profit, citing strong AI-driven demand for its high-bandwidth memory chips, which are used by Nvidia. The company said a "virtuous cycle" of AI productivity gains and new revenue streams is reinforcing AI adoption.

European markets showed mixed performance, with the FTSE 100 falling after HSBC missed profit expectations, while the DAX and other indices edged higher. Asian markets rallied on gains in chipmakers, and analysts noted improved sentiment toward technology ahead of upcoming corporate earnings and central-bank decisions.

The Federal Reserve is expected to keep rates unchanged in its upcoming meeting, though market pricing suggests a possible hike later in the year. The European Central Bank and Bank of Japan are also projected to hold rates steady.