China's stock markets suffer volatility as uncertainty of AI, semiconductor sectors emerges: analyst

China

China's stock markets suffer volatility as uncertainty of AI, semiconductor sectors emerges: analyst

2026-07-24 21:02 Last Updated At：07-27 11:46

The uncertainty of Chinese AI and semiconductor industries has led to volatility in China's stock markets this week, said China Global Television Network (CGTN) analyst Timothy Pope on Friday.

The benchmark Shanghai Composite Index was down 1.61 percent to 3,814.20 points on the day.

The Shenzhen Component Index closed 2.47 percent lower at 13,774.68 points, while ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, lost 2.65 percent to close at 3,480.87 points.

"It was a volatile week for the Chinese mainland markets, particularly for technology stocks. We saw some very strong gains in the middle of the week, but today brought a reality check for AI and semiconductor shares. The Shanghai Composite Index fell 1.6 percent by the close today, although it still finished 1.3 percent above last Friday's close. The Shenzhen Component and ChiNext also fell sharply today but remained higher over the week," said Pope.

Friday's drop, according to Pope, was due to the profit-taking from the tech-related industries.

"By Tuesday, AI stocks were looking a bit oversold following last week's rout. We saw new Chinese model releases like Kimi K3 also causing a bit of a stir, restoring some longer-term confidence in the sector's viability. And in fact, demand for some of those models was strong enough for developers to suspend new subscriptions while they expanded their computing capacity at the back end. But this week's trading also really illustrates the uncertainty surrounding the valuations of Chinese AI and semiconductor companies. Many of them are trading at demanding multiples of their expected earnings, but technology, of course, remains the main engine of the current market rally. And that is creating quite a short cycle of news-driven gains, followed then very quickly by profit-taking," the analyst said.

U.S. Fed holds interest rate steady ahead of midterm elections

The U.S. Federal Reserve on Wednesday kept its target range for the federal funds rate unchanged at 3.75 to 4 percent, less than a week ahead of the 2026 midterm elections.

"Economic activity is expanding at a strong pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little," said the Federal Open Market Committee (FOMC) in a statement.

Nevertheless, inflation remains elevated. In support of the Federal Reserve's dual mandate, "the Committee decided to maintain the target range for the federal funds rate at 3-3/4 to 4 percent," the FOMC said.

The committee reaffirmed "its policy of maintaining ample reserves in the banking system" and "price stability," saying the accumulation of more information will help the committee "determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2 percent goal."

Of the 12 FOMC members, 10 voted to keep the rate unchanged, while two favored a rate hike.