China's STAR 50 AI and Chip Index Falls 40% in Under Four Months

The STAR50 index closed at 1,315.50 on October 26, down 2.23% in that session, according to Reuters. Traders cited elevated valuations, tax burdens and the risk that the United States could bar Chinese-made data center equipment. AI-related stocks make up 42% of China's total market capitalization, based on Goldman Sachs figures. Retail-heavy names fell hardest after institutions sold into the rally that followed regulatory guidance on leveraged and high-frequency trading. Optical component makers Zhongji Innolight and Eoptolink are down about 60% from their highs. The CSI300 sits about 20% below its June peak, while the Nasdaq has pulled back only 6% from its record. For founders, the selloff signals tighter capital for Chinese AI companies. One investment chief expects it to halt listing plans for many firms, which affects exit routes for Chinese startups. Teams that depend on Chinese hardware or listings should watch export-curb risk closely.