Economists Sound Alarm, Warn AI Bubble Has Just Burst in China
by Frank Bergman
Economists have issued a troubling alert as China’s artificial intelligence (AI) investment boom suffers a staggering collapse, wiping out $480 billion in market value and delivering a stark warning as investors pour enormous sums into the technology worldwide.
The country’s STAR50 index of AI and semiconductor companies plunged 40 percent over four months, according to Reuters.
Alarmingly, Reuters reported that China’s AI bubble “has already burst.”
Experts fear the collapse in China will ripple globally, triggering economic destruction around the world as the bursting bubble spreads to international markets.
The selloff has hammered prominent robotics and chip companies, exposing the risks behind a speculative frenzy that drove valuations sharply higher.
Beijing-based fund manager Dong Baozhen told Reuters:
“The stock market later evolved into a speculative crazy bull.”
“And now we see the bubble bursting,” he added.
Robotics and Chip Companies Hammered
Shares in Chinese robotics company Unitree have lost half their value since its heavily promoted initial public offering in August, Reuters reported.
Chipmaker CXMT has shed more than a quarter of its value in the past month.
The losses come after investors concentrated enormous amounts of money in companies tied to the AI boom.
According to Goldman Sachs, AI-related stocks account for approximately 42 percent of China’s total stock market capitalization, leaving the market heavily exposed when enthusiasm turns into selling.
Reuters also reported that state-backed investors sold shares during market rallies as Chinese authorities sought to contain volatility and restrain rapid gains.
Those interventions have not prevented a dramatic decline in valuations.
Billions Keep Flowing Despite Collapse