China’s technology hardware sector just went from hero to zero in about six weeks. A fear/greed indicator tracking the STAR 50 Index, China’s premier board for innovative tech companies, has fallen to its most bearish reading since April 2022, marking a dramatic reversal for a sector that was the hottest trade in global markets just months ago.
The whiplash is real. The STAR 50 Index surged roughly 62-64% during the second quarter of 2026, powered by a wave of domestic AI spending and government policy support that had investors scrambling to get exposure. Then June happened. The index has since plummeted 16% from its record high, and the mood has shifted from euphoria to something closer to existential dread.
What drove the rally, and what killed it
The bull case for Chinese tech hardware was straightforward and, for a while, very persuasive. Huawei projected a 60% increase in AI chip revenue for 2026, giving investors a concrete reason to pile into the sector. Beijing’s push to build domestic semiconductor capabilities, partly as a hedge against US export restrictions, added a geopolitical tailwind that made the trade feel almost inevitable.
The CSI 300 blue-chip index peaked in May 2026. Chipmaker indexes hit all-time highs shortly after.
