China tech stocks plunge on AI profit doubts — SkimNews
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- STAR 50 Index plunged over 40% from its July peak as investors question whether AI investments can generate earnings to justify high valuations
- CATL fell 37% year-to-date despite posting 59% revenue growth in Q3, with net profit rising only about 15%, highlighting a widening gap between growth and profitability
- DeepSeek's emergence in early 2025 initially fueled optimism about China's AI competitiveness, but fading enthusiasm has led to scrutiny over monetization timelines
- Benjamin Cavender of China Market Research Group said the sell-off began as valuation correction but has evolved into a critical assessment of whether AI excitement can translate into earnings
- Vey-Sern Ling of Union Bancaire Privée warned rising AI spending may pressure near-term earnings, with long-term monetization still uncertain despite multi-year low valuations
- Tai Hui of JPMorgan Asset Management noted strong initial demand for AI IPOs has faded, and investors now demand clearer paths to profitability from tech giants
Why it matters: Chinese tech valuations have collapsed even as revenues grow, meaning companies like CATL are expanding without proportional profit gains. This disconnect threatens investor confidence and limits upside unless earnings stabilize and AI spending shows tangible returns.
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