The STAR 50 Index, which tracks major Chinese technology and semiconductor companies, has declined by approximately 30% since the end of June. This downturn marks the index's worst quarterly performance in recent memory, following a nearly 75% rally in the preceding three months.
The selloff was most severe in July, when the index lost more than 28% of its value. During the same period, the broader CSI 300 Index dropped by 9–10%, representing its weakest monthly performance since January 2016.
Individual companies faced significant losses, with Biwin Storage Technology and Moore Threads Technology seeing share prices fall by more than 40%. Yuanjie Semiconductor and Hua Hong Grace Semiconductor recorded single-day declines of at least 14% during July.
Global semiconductor indices in the US, South Korea, and Taiwan experienced similar downward trends. Investors are increasingly questioning whether the high capital expenditure on AI infrastructure will yield proportional financial returns, especially as open-source models like Moonshot’s Kimi K3 emerge.
In response to the market volatility, state-backed funds in China intervened to purchase shares. However, these efforts failed to reverse the broader negative trend, leading investors to shift capital into defensive sectors.
