China’s STAR 50 Index Falls Nearly 5% as AI Rally Unravels

China’s technology-focused STAR 50 Index fell nearly 5% on Oct. 9 to a five-month low, extending its two-day decline beyond 9% as investors reassessed valuations across artificial-intelligence and semiconductor stocks.

The index fell as much as 4.6% during China trading hours before closing sharply lower. The decline followed a technology-sector rally of more than 70% from April through July, which later reversed.

The STAR 50 and ChiNext each fell about 30% from their late-June peaks during the third quarter. Biwin Storage Technology and Moore Threads Technology each lost at least 40% during the quarter, underscoring the extent of the reversal among some hardware stocks.

The STAR 50 tracks 50 large, liquid companies listed on the Shanghai Stock Exchange’s technology-focused STAR Market. Investor demand during the earlier rally concentrated on artificial intelligence, semiconductors and other technology hardware companies.

The reversal renewed concerns that expected AI demand and spending may not support the valuations reached during the rally. The selloff came amid broader weakness in Chinese equities, higher global yields and renewed geopolitical concerns.

The market move highlights the risks facing China’s technology shares after a sharp run-up earlier in the year. The latest decline has pushed the sector from a period of strong momentum into a broader reassessment of growth expectations and valuations.