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China’s AI stocks surge 65% in first half but bubble fears begin to weigh on sentiment

China’s AI stocks entered the second half of 2026 with improving earnings momentum, but scepticism about the sector is increasing

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Michael Burry, the US hedge fund manager whose story was popularised in the 2015 film 'The Big Short', said in a Substack post on Tuesday that there were stretched valuations in AI-related markets. Photo: Getty Images
Daisy Wu
China’s artificial intelligence stocks entered the second half of 2026 with improving earnings momentum, but first-half results and high-profile bearish positioning by US investors regarding the global AI trade have begun to weigh on sentiment.

“It is only a matter of time now,” said Michael Burry, the US hedge fund manager, in a post on Substack on Tuesday. Burry, who famously shorted the American housing market before the 2008 financial crisis and whose story was later popularised in the 2015 film The Big Short, warned of what he sees as stretched valuations in AI-related markets.

Burry said he had expanded his bearish positions across US-listed AI-linked assets, including Nvidia, Tesla, Applied Materials, the iShares Semiconductor ETF (SOXX), and Caterpillar, citing concerns about elevated semiconductor valuations and the sustainability of the current investment cycle.
His comments added to a growing wave of scepticism towards the global AI trade, as investors reassess whether record capital outlays across the sector would translate into durable earnings growth during the ongoing first-half earnings season.

Meanwhile, China’s technology sector showed a strong rally in the first half of the year. The SSE Star 50 index surged roughly 65 per cent during the January-to-June period, marking one of its strongest half-year performances on record, driven by gains in semiconductors, optical modules and AI infrastructure names.

Within the chip sector, Cambricon Technologies briefly crossed the 1 trillion yuan (US$147 billion) market capitalisation threshold, while Hygon and Moore Threads reported sharp revenue acceleration, underscoring robust domestic demand for AI chips and related computing infrastructure.
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