Chinese markets lose trillions as race for AI supremacy with US takes its toll
Lack of profits and the threat posed by western countries are raising concern about the sustainability of Beijing’s AI boom Trillions of dollars have been wiped from China’s stock markets in recent months amid increasing anxiety about the future of artificial intelligence, as Beijing races against the United States for dominance in the sector. The STAR 50 Index, which tracks technology and…
In recent months, China's stock markets have experienced a significant loss of over $2.4 trillion, as the nation's relentless pursuit of AI supremacy in the face of Western competition takes its toll. The STAR 50 Index, which tracks technology and innovation companies on the Shanghai stock exchange, has plummeted 40% since June, while other major company indexes have dropped by approximately 20% over the same period.
This sudden decline has resulted in the loss of $2.4 trillion from the Chinese stock market since May, as reported by Bloomberg.
AI stocks make up more than 40% of China and Hong Kong's stock market value, according to Goldman Sachs, meaning that any reduction in value will have far-reaching effects on the entire domestic market. Despite the government's efforts to bolster China's technology industries, particularly those that incorporate AI, the domestic economy lacks the strength to maintain a booming market.
The Chinese government has heavily invested in AI, including the establishment of a 60 billion yuan state-backed AI investment fund that began channeling funds to domestic developers this month.
However, Chinese consumers have been hesitant to spend on many sectors, including technology, leading to struggles for many tech companies in turning a profit. The lack of profits is one of several factors contributing to the market sell-off. Another significant reason is the threat of bans from Western countries, especially the United States, which could further impact China's AI sector.
Dan Wang, China director for the Eurasia Group, noted that "profit margins are not as good as expected" and that "the US is raising rates. And China's domestic demand is so weak."
The US has prohibited humanoid robots from entering China, citing national security concerns, and is reportedly considering a ban on Chinese components in data centers. China's heavy reliance on exports leaves its domestic companies vulnerable to restrictions in the US, which struggle to sell enough products at home. China's focus on robotics, also known as embodied AI, as the solution to societal issues such as an aging population and shrinking workforce has been largely driven by government agencies and research institutions, rather than everyday consumers who find the products too expensive and impractical for home use.
Written by urgent.news from The Guardian's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
