Why China’s AI triumphs aren’t saving its flagging stock market

TOKYO – When Chinese stocks lose a South Korea-sized sum in five months, Beijing has a problem.

The US$2.4 trillion plunge in market value since May sits between Korea’s $2.25 trillion GDP and Canada’s $2.49 trillion. Many factors could explain Chinese shares entering bear market territory, but a major one is a protracted slump in consumption and property. External pressure is also mounting as the AI trade wobbles.

The irony is that China keeps winning the AI innovation race while its stock market gets nothing from it. The CSI 300 index is down 11% this year, while the Taipei and Seoul bourses are up 59% and 31%, respectively.

Since the “DeepSeek shock” of January 2025, Chinese labs have repeatedly impressed. July’s launch of Moonshot AI’s Kimi K3 proved DeepSeek was no aberration, and Stanford’s Institute for Human-Centered AI recently concluded that China is rapidly eroding America’s lead.

Samm Sacks of Johns Hopkins’ School of Advanced International Studies (SAIS) calls the gap between US and Chinese models “narrow and fragile.”

This week, DeepSeek raised roughly $15 billion, setting the stage for one of China’s most anticipated IPOs in years. Yet shares in AI developers MiniMax and Z.AI (Zhipu) are being hammered daily, just as more listings enter the pipeline.