In China, the STAR 50 technology index lost about 40% in less than four months, wiping out $480 billion in market value. The collapse reignites the debate on a possible artificial intelligence bubble and the risks linked to billions in investments in the sector.
A company can introduce increasingly advanced robots, attract the attention of investors, and still see its stock price plummet. That’s what’s happening in Chinawhere the enthusiasm forartificial intelligence is running into doubts about how much money the industry will actually make. The phenomenon has reignited the debate on the so-called AI bubble and on the possibility that a similar correction will also occur in the United States and Europe. The issue closely concerns large technology companies, committed to investing billions in the development of new systems, but also those who hold shares or funds linked to the sector.
What’s happening in China
According to an analysis by Reuters of 26 October 2026, lo STAR 50the Shanghai Stock Exchange index which brings together important innovative companies, including semiconductor manufacturers, lost approximately 40% in less than four months. The decline has cleared approx 480 billion dollars in capitalizationi.e. of stock market value, without directly subtracting money from the companies’ coffers.
Among the companies involved is Unitreeknown for its humanoid robots, whose shares have halved since their stock market debut in August. Chip manufacturers Moore Threads And MetaX they have lost about half their value since July, while some optical component suppliers have seen declines of 60% from summer highs.
There was no single triggering event. After two years of gains fueled by enthusiasm for AI and expectations of public support, doubts about future earnings have emerged. Very high valuations, competition between manufacturers and the risk of restrictions on the use of Chinese equipment in US data centers also weighed on the stock.
To understand why there is talk of a possible bubble, just consider another number: despite the collapse, the STAR 50 was still worth around 100 times annual profits of the companies represented, compared to a ratio of around 30 for the US Nasdaq 100. In other words, investors were willing to pay very high prices relative to companies’ actual earnings, betting on strong future growth.
We talk about a speculative bubble when share prices rise beyond what is justified by the economic results and realistic prospects of companies. If investor expectations are lowered, prices can fall rapidly, as happened in China. This decline, however, does not necessarily prove that the entire AI sector is overvalued.
How many billions are being invested in AI and why are there fears that the bubble will burst
According to the AI Index Report 2026 ofStanford Universityin 2025 the private investment in artificial intelligence they reached approx $285.9 billion in the United Statescompared to 20.9 billion in Europe and 12.4 billion in China. The comparison does not include all public funding, which is especially relevant in China.
On a global scale, Goldman Sachs forecasts for around 2026 $1 trillion in AI-related investmentsfocused above all on infrastructure. The estimate concerns capital expenditure, i.e. those intended for the purchase or construction of assets to be used over time. It is a different measure from the private investments surveyed by Stanford, therefore the data are not directly comparable.
Much of the resources are allocated to data centers, servers, specialized chips, networks and cooling systems. These infrastructures will have to pay for themselves over time through the services sold. If customers and businesses purchase fewer than expected, recovery of the sums used could take several years.
A concrete example comes from Microsoft. In the quarter ended September 2026 the group recorded $92.3 billion in revenues and $36.6 billion in net profit, in addition to 45.2 billion in capital expenditure. This figure also includes the value of assets acquired through financial leasing, contracts that allow them to be used by paying over time. These are data relating to the entire group, not just the AI, and therefore do not allow the profitability of individual projects to be calculated, but show the extent of the expenses.
The crux is whether future revenues will be sufficient to justify the costs and stock market valuations. History offers a precedent: during the dot-com bubble, broke out in 2000, many Internet companies lost much of their value, but the Internet continued to spread. Despite the necessary differences, that story demonstrates that a technology can succeed even when some companies disappoint investors.
Could it also happen in the United States and Europe?
In the United States there is no generalized collapse comparable to the Chinese one, at least not for now. According to Reuters, as of October 26, the Nasdaq was dropped by approximately 6% from the highs reached a few weeks earlier, recording a much more limited decline compared to the STAR 50, even though they are indices with different compositions.
Even the balance sheets of large US companies show how high technological investments are, although not all expenditures are directly attributable to AI. In quarterly results released on October 28, 2026, Alphabetparent company of Googlereported that Google Cloud revenues had more than doubled, reaching $30.7 billion. During the same period, however, the group supported $51.4 billion in capital expenditures and registered a negative free cash flow of 9.1 billioni.e. the liquidity generated by operating activities was not sufficient to cover investments. Other factors, including the build-up of inventories and the payment of a European fine, also affected cash flow. This doesn’t mean that Alphabet was at a loss: the quarter ended with a net profit of around $26.2 billion.
Compared to some of the younger companies caught up in China’s downturn, Alphabet and Microsoft can finance expansion as well through already profitable businesses. However, even this does not guarantee that the sums invested in AI will produce the desired returns or that prices will continue to rise.
The International Monetary Fundin the October financial stability report, signals the risk of a correction of AI-related stocks if growth and profitability prospects prove less solid than expected. Any decline could be amplified by the debts incurred to finance new projects and by the concentration of investments in a few large companies.
The consequences could also come in Europe. According to an analysis published by European Central Bank in August 2026, euro area households are exposed for approximately 440 billion euros to US technology stocksespecially through investment funds. Not all of these holdings are directly tied to AI, but a decline in large American companies could reduce the value of invested savings. A prolonged slowdown would also risk slowing down financing, projects and hiring in the sector.
The Chinese case demonstrates how quickly expectations can change, but it does not allow us to determine if or when a bubble will burst elsewhere.
