Market capitalization loss in China

Chinese stock markets have lost nearly 2.5 trillion dollars in market capitalization since their peak in May, according to calculations by Le Grand Continent. This decline is partly attributed to growing investor doubts about the profitability of companies in the artificial intelligence sector and prolonged stagnation in consumer spending in China.

Significant losses for key companies

Several key companies have experienced significant losses. Unitree, a robot manufacturer and one of the world's leading companies in the humanoid robot market, has seen its stock lose more than a third of its value since its first day of trading in August. CXMT, the largest Chinese manufacturer of DRAM memory chips, has lost more than a quarter of its value since its peak in mid-August, amounting to approximately 170 billion dollars.

Continued selling despite intervention

Despite the intervention last week by the "national team"—state-linked funds and brokers tasked with making mass purchases of stocks to stabilize market prices—investors in mainland China continued to sell their shares in Hong Kong, totaling 20 billion Hong Kong dollars (2.5 billion dollars) since the beginning of the month. This is a monthly record since July 2021, according to the Financial Times.

Upcoming financial results expected

The results expected this week could prolong the decline. Tomorrow, Thursday the 29th, two Chinese companies that manufacture equipment used in data centers dedicated to AI are expected to publish their financial results. These include Zhongji Innolight, one of the world's leading manufacturers of optical modules, and Victory Giant Technology, a printed circuit board company based in Huizhou, Guangdong province. The stocks of both companies have lost more than half of their value since their year-to-date highs.

Profitability challenges in the tech sector

While the margins of Chinese chip foundries, such as SMIC and Hua Hong, are rising, memory manufacturers such as CXMT are facing higher costs on their most advanced products, which erode their profits. The performance of these technology companies largely depends on massive investments in artificial intelligence, which require computing equipment and infrastructure to be trained and used. However, in China and the United States, AI companies still struggle to find a profitable business model.