The global artificial intelligence fever is cooling, sending ripples through China’s equity markets as the tech-heavy ChiNext and STAR 50 indices undergo significant corrections. This synchronized retreat follows a sharp downturn in global semiconductor leaders, signaling that the growth-at-any-price phase of the AI cycle may be giving way to a more cautious, valuation-sensitive environment. As the Philadelphia Semiconductor Index faces its own reckoning, Chinese tech stars like SMIC and other hardware giants are no longer immune to the broader global volatility.
Mainland analysts point to the Philadelphia Semiconductor Index’s elevated price-to-earnings ratio, currently hovering above 40, as a primary catalyst for the global sell-off. In China, the correction is exacerbated by a thinning safety cushion of floating profits among major institutional funds. Analysts at Shenwan Hongyuan warn that if these profits continue to erode toward break-even levels, the market could see a wave of concentrated redemptions as investors move to preserve capital.
Amid this volatility, the investment narrative is shifting toward a diversified rotation where capital seeks refuge in overlooked or undervalued sectors. Strategists are increasingly favoring domestic brokerages, strategic resources such as non-ferrous metals and chemicals, and the export alpha chain. These sectors are viewed as beneficiaries of global supply chain restructuring and a potential easing of US inflationary pressures, offering a stark contrast to the high-beta turbulence of the semiconductor trade.
This transition represents a pivot toward resilience as investors weigh the uncertainties of a potential second Trump presidency and the Federal Reserve’s hawkish stance on interest rates. While AI remains the long-term structural theme, the short-term focus has pivoted to HALO assets—highly liquid, resource-backed, and inflation-resistant stocks. These assets provide a strategic buffer against geopolitical headwinds and the cooling sentiment in the high-growth technology space.