No corner of the global AI-trade unwind has fared worse than China. That is how Bloomberg frames the fallout in its October 17 report.
The data is stark: STAR50 — Shanghai's benchmark for technology shares — has dropped almost 40% across the current half-year, the weakest showing of any major tech index worldwide. Domestic chip producers MetaX Integrated Circuits and Moore Threads have both roughly halved in value over the same stretch.
The damage kept spreading this week. On Wednesday, the CSI300 slid 1.4% to its lowest close since August 2025. The Shanghai Composite fell to its weakest level since July 2025. And the STAR50 lost another 3.3% in a single afternoon session as AI supply-chain sentiment soured. Optical-transceiver maker Zhongji Innolight dropped 5.7%. Eoptolink slid 7.5%. AI-chip designer Cambricon fell 3.4%, according to Reuters and Xinhua reporting carried this week. HSBC responded by trimming its year-end 2026 China targets by 9–15%. The new marks sit at 4,100 for the Shanghai Composite; 4,800 for the CSI300; and 14,500 for the Shenzhen Composite — implying 8–15% upside from current levels, which says the pain is at least partly priced in.
The rout crossed the Pacific on Friday. The Nasdaq Composite closed down 2.1% at 26,140.03. Its 4.5% weekly slide was the worst since late June and ended a four-week winning streak. The S&P 500 fell 1.1% to 7,659.44, down 2% on the week. The Dow slipped just 0.3% and actually gained 0.7% for the week. Software stocks took the worst of Friday's beating. The iShares tech-software fund dropped 4.8%. Twilio cratered 10.6% — the worst single-day fall in the S&P 500. CoreWeave sank 10%, extending a five-day loss of 23%.
Why it matters
The selloff is not really about earnings — it is about how the AI boom is financed. Two hotter-than-expected US inflation prints in one week (September CPI at 3.7%, PPI at 6.3%) lifted December Fed hike odds to 89% and pushed the 10-year Treasury yield to 5.09%, briefly touching 5.33% right after the CPI release. When long-duration money costs that much, markets start asking hard questions about AI infrastructure funded with debt. CoreWeave's 23% five-day fall is the poster case. The defensive rotation is visible on both sides of the Pacific: the Dow rose 0.7% on the week while the Nasdaq fell 4.5%, and in China the Coal Index rose 1.1% and the CSI Energy Index added nearly 2% on the same day tech collapsed.
What to watch
- October 19, 10:00 a.m. local time: Beijing publishes third-quarter GDP alongside September retail sales, industrial production and investment figures. Reuters consensus expects 4.4% growth — a miss would deepen the three-month downtrend in Chinese benchmarks.
- October 27-28: the Fed's next meeting. Chair Warsh stayed tight-lipped in Bangkok this week; CME FedWatch prices a 17% chance of an October move but 89% for December. Any hawkish signal hits debt-funded AI names hardest.
- EU-China trade: tensions are flaring again — Brussels is weighing additional trade measures against Chinese exports, AFP reports, adding another weight on Chinese shares.
MarketRadar take
The AI trade is being repriced on financing terms, not just fundamentals, and Chinese hardware names sit at the wrong end of that repricing — expensive capex cycles, soft domestic demand, and US rate expectations working against every discount-rate model. HSBC's implied 8-15% upside suggests the pain is largely priced in. But with China's GDP print due October 19 and the Fed meeting eight days later, patience beats prediction.
