China revives market-support tools as AI chip shares lose half their value

China’s battered technology shares are getting renewed state support after steep losses at prominent AI chipmakers. Officials this week revived liquidity tools intended to encourage share purchases and increased activity by state-backed investment funds, according to local media cited by AFP. The intervention comes as investors question both domestic demand and the payoff from AI.

The effort has a sizable financial backdrop. On Tuesday, net inflows into nine exchange-traded funds, or ETFs, reached 120 billion yuan, about $18 billion. That was close to a record, according to Bloomberg data cited by AFP. The funds are commonly used by Beijing to support the market, with technology stocks a particular target.

Regulators are also reportedly seeking to preserve market liquidity by restricting new listings. The Financial Times reported this week that Chinese regulators had told banks to halt company listings, according to AFP. That instruction accompanies the renewed tools aimed at encouraging purchases and the increased trading volume of state-backed investment funds.

These are measures to support share buying and market liquidity, rather than evidence that the companies’ earnings have improved. The pressure described by investors reaches beyond trading conditions: Charu Chanana, chief investment strategist at Saxo Markets, pointed to weak domestic demand, intense competition and disappointing earnings as concerns weighing on Chinese technology shares.

The AI favorites have fallen harder

The retreat has been especially severe at Moore Threads and MetaX, Chinese chipmakers presented as challengers to Nvidia. Their losses over the past six months are far deeper than the decline in Shanghai’s technology-focused Star50 index over the same period. The difference shows how much more sharply those individual AI-linked stocks have fallen than the benchmark.

Robot maker Unitree illustrates another reversal in enthusiasm. Its shares surged when it made its Shanghai debut in August, but were down 40% from their peak that day nearly three months later. The company makes walking and dancing humanoids used by AI researchers working to make robots act autonomously.

Policy support meets the earnings question

Chanana sees reasons for investors to reconsider the sector despite those concerns. Fresh policy support, lower valuations and hopes for better sentiment are drawing attention back to technology shares, she told AFP. Her assessment puts the potential attraction in cheaper prices and renewed support—not in a claim that the earnings problems have already been resolved.

Interest in technology investing has not disappeared, either. Ajin Jin, a partner at Shanghai-based investment firm Kunquan, described weekly roadshows in Beijing and Shanghai as full, with some attendees sitting in the aisles. His account points to continuing investor interest even after the sharp falls in the share prices of prominent companies.

Investment commentator Li Daxiao likewise argued that the industry’s development should be distinguished from share-price fluctuations. He attributed technology-stock weakness to external risks and noted that Chinese shares had fallen alongside counterparts in the United States, Japan and South Korea. That is an optimistic reading of the industry despite the market retreat.

Stephen Inness of SPI Asset Management offered a more cautious assessment. He said a state-backed effort would build on measures China took last month to stabilize equities. But those measures had so far been insufficient, he warned, against a weak domestic economy and doubts over AI earnings—the obstacles renewed buying support still has to confront.