China's STAR 50 Index dropped as much as 4.6% on October 9, extending a two-day slide past 9%, as investors question whether global AI demand can justify the valuation these companies command. The selloff is the steepest since July and has hit AI and semiconductor names hardest, even though the sector is still far from cheap after a 70%-plus rally earlier this year.
On October 9, 2026, the STAR 50 Index dropped as much as 4.6%, extending a two-day decline that pushed losses past 9%. That marks the steepest slide since July, and the stocks taking the most damage are tied to artificial intelligence and semiconductors, this year's favorite trade. Investors are questioning whether global AI demand and spending can keep up with the prices they paid for these companies.
A rally that ran ahead of itself
From April to July 2026, China's tech sector gained more than 70%. The momentum then broke: by late June, the STAR 50 and ChiNext had both hit their peaks, and over the third quarter each fell around 30% from those highs. By late September, after third-quarter earnings came in, the sector had recorded its worst quarterly performance on record. Biwin Storage Technology and Moore Threads Technology, two of the year's biggest AI names, each dropped at least 40% in the quarter ending September 2026.
Why the selling picked up again this week
Several pressures are landing at once. Investors have been rotating toward defensive sectors, global yields have moved higher, and geopolitical tensions resurfaced after the holiday break.
The weakness is not confined to tech, either. Broader Chinese benchmarks, including the CSI 300 and the Shanghai Composite, approached one-year lows on October 8 and 9, as money shifted into cyclical names. The reversal has been linked to excessive optimism earlier in the year around "hard tech" investments — the label for companies building physical technology like chips and computing hardware — and concerns over competition and US export controls have also weighed on the trade.
Still expensive, even after the drop
The correction has not made these stocks cheap. The STAR 50 still trades at around 100 times forward earnings, well above global semiconductor benchmarks.
A 30% drop from the peak sounds like a lot of air let out. But when the starting point was a 70%-plus run, a large chunk of the gains is still baked in.
Source: Crypto Briefing
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