[Digital Today intern reporter Seung-a Yoo (유승아)] China's mainland stock market has lost about $2.4 trillion in market capitalisation since May.

Decrypto, a blockchain media outlet, reported on Oct. 27 that selling spread across the broader stock market as investor scepticism grew over whether China's artificial intelligence (AI) industry can generate real profits.

Goldman Sachs said AI companies account for 42 percent of total market capitalisation and 57 percent of trading volume among stocks listed in mainland China and Hong Kong. The structure makes the overall market vulnerable when AI-related shares fall.

The CSI 300 index, made up of 300 large listed Chinese companies, fell more than 20 percent from its Oct. 22 peak, entering a bear market. Technology and semiconductor stocks were hit hard. The Shanghai STAR 50 index fell 40 percent in less than four months, wiping out about $480 billion in market capitalisation.

Despite the stock decline, valuation concerns remain. The STAR 50 index's price-to-earnings ratio (PER) has fallen from about 250 times at its peak, but it is still around 100 times. The PER of the Nasdaq 100, a U.S. technology-heavy index, is about 30 times.

The emergence of Chinese AI models also increased market volatility. When Chinese startup DeepSeek unveiled a low-cost, high-performance chatbot in January 2025, the market capitalisation of U.S. AI semiconductor firm Nvidia fell by about $600 billion in a single day. Semiconductor shares also plunged in July after the arrival of Kimi K3, developed by China's AI research institute Moonshot AI.

China's government policy to foster domestic semiconductors also had an impact. The Financial Times reported that China's internet regulators were said to have notified companies including ByteDance and Alibaba in September 2025 to stop buying Nvidia chips. Beijing-based AI research institute Z.ai said it trained its GLM-5.2 model using only Huawei chips.

The market also points to weak Chinese consumption and doubts about AI companies' ability to recoup investments as reasons for the decline. A Beijing-based fund manager said, "The stock market later turned into a speculative and frenzied bull market," adding, "Now we are seeing the bubble burst."

Robot maker Unitree drew retail investor orders equivalent to 8,000 times the shares offered in its August listing, but its stock has fallen to nearly half its level since listing, despite a rebound this week.

Tighter U.S. regulation is also a burden. The U.S. Federal Communications Commission (FCC) banned imports of new foreign-made humanoid robots in July on national security grounds. The United States is also pushing measures to ban Chinese optical communications parts from domestic data centres. Shares of related companies Zhongji Innolight and Eoptolink have fallen about 60 percent from their peaks.

Unease in global financial markets is also pressuring risk assets. Brent crude was above $111 a barrel, and the U.S. 10-year Treasury yield neared 5 percent. Bitcoin also fell at one point below $80,000 ahead of a U.S. Federal Reserve decision on Oct. 28. Weakness in Chinese technology stocks reflects not only doubts about AI companies' profitability but also the combined effects of U.S. regulation and global financial market conditions.