Chinese Markets Stung by Investor Retreat from Tech Shares

China and other Asian equity markets, roiled by the continuing global debate about whether AI stocks are overvalued, fell on Friday after technology shares in New York led markets there to their worst one-day decline in a month.

The Shanghai Composite Index lost 0.97 percent on Friday to end at 3,990 points. The Shenzhen Component Index plunged 1.9 percent, while tech startup ChiNext slumped 2.8 percent.

The retreat was led by tech losses that included Biwin, Toyou and Longsys – companies involved in the memory storage of semiconductors.

"Despite the surging demand for storage hardware due to AI development, the sector was dealt a heavy blow this week from Japanese memory storage manufacturer Kioxia, which did not bode well for tech shares already under pressure amid bubble talk," said Lu Zhe, an economist at Soochow Securities.

On Thursday, Kioxia, a major supplier to Apple and significant AI stock winner this year, posted September quarter results and forward guidance that fell short of expectations, stirring the debate about the short-term earnings potential of high-value AI stocks.

Shanghai-based Semiconductor Manufacturing, China's largest contract chipmaker, beat market forecasts with a 29 percent surge in third-quarter profit but said it doesn't have enough capacity to meet demand for analogue chips used in mobile fast charging and power management. Its shares fell 4 percent in shanghai.

Investor concern about newly Chinese data showing slowing growth in October retail sales was compounded by reports that the Singles Day online shopping festival, which concluded yesterday, may show weaker sales growth than last year. Preliminary estimates from Chinese consumer research firm Syntun estimated this year's sales at 1.7 trillion yuan (US$238 billion). That would be a 14 percent increase from a year earlier but below the 27 percent growth of 2024.

In the e-commerce realm, JD.com, a major player in Singles Day, reported a 55 percent profit decline in the third quarter, largely on its huge investment in marketing amid a fast food-delivery war with Alibaba and Meituan. JD shares dropped 6 percent in Hong Kong on Friday. Even Tencent, China's largest gaming and social media company, couldn't buck negative sentiment after posting a 19 percent gain in third-quarter profit. Its shares fell 2.3 percent in Hong Kong.

China's securities regulator this week reiterated its pledge to prevent sharp market volatility, deepen reforms and expand access to foreign investors.

"The A-share market is in the early stages of a new upward trend, driven by government policies and industrial trends," Lu predicted. "The upward trend is likely to be a spiral."

Across Asia, Japan's Nikkei lost 1.8 percent on Friday as investment giant SoftBank shares plunged 9 percent in the third straight day of selloff after the company announced it sold its entire stake Nvidia for US$5.83 billion. SoftBank ended with its worst weekly loss in five years. In South Korea, the Kospi tumbled 3.8 percent.

In New York, markets trading after the close of Asian bourses clawed back some ground from Thursday's worst declines in a month, with the tech-heavy Nasdaq eking out a 0.1 percent gain. The S&P 500 was flat. Leading AI players Nvidia and Oracle helped pulled markets up from mid-day losses. In Europe, the broad Stoxx600 index fell 1 percent on AI bubble concerns.