Valuation Concerns Continue to Escalate as China Tech Hardware Stocks Plunge Over 9% in Two Days
nashnova research
China's Star 50 Index dropped over 9% in two days — the steepest two-day fall since late July — as chip and optical-module stocks, previously buoyed by AI self-reliance premiums, face a double squeeze from global AI valuation cooling and geopolitical risk.
How bad is the sell-off?
The Star 50 Index fell as much as 4.6% intraday on Friday, bringing the two-day cumulative decline past 9% — the worst since late July.
The ChiNext Index dropped up to 3.4% over the same period. Both indices had hit all-time highs in June.
This means → the sell-off is not stock-specific — it is a systematic repricing across the entire tech hardware sector.
Why are these stocks hit the hardest?
Chip and optical-module names previously benefited from Beijing's push for AI self-reliance, which inflated valuations and built up a significant "self-reliance premium."
In plain terms = the market had been paying extra for the "domestic substitution" story. That premium is now being squeezed out.
Gary Tan, portfolio manager at Allspring Global Investments, said: "This sell-off reflects a broad contraction in A-share risk appetite, hitting high-valuation tech stocks that had enjoyed a notable self-reliance premium especially hard."
How much further can valuations compress?
Even after the worst quarterly performance on record in Q3, the Star 50's forward P/E still sits at 43x — far above KOSPI's 5x.
This means → if the global AI narrative cools further, China's tech hardware sector still has substantial room for valuation compression — 43x versus 5x speaks for itself.
In plain terms = after all this selling, these stocks are still "expensive" by international standards.
Is valuation the only pressure?
Globally: rising borrowing costs and expanding debt loads are making investors more cautious toward high-multiple AI plays.
Geopolitically: markets fear the U.S. may restrict optical-module imports, adding a layer of policy risk.
Domestically: A-shares reopened Thursday after the National Day holiday to rising global bond yields, elevated energy costs, and soft holiday spending data. The CSI 300 fell 2.4% across the first two post-holiday sessions.
What to watch next?
The key variable: whether high-valuation tech stocks can find a new equilibrium between price and fundamentals.
This reflects the market's core tension — the long-term AI thesis has not changed, but short-term pricing has run ahead of the fundamentals.
In plain terms = the story is still there, but the price must first digest the froth that the storytelling built up.
市场有风险，内容仅供研究参考，不构成投资建议。