The global artificial intelligence boom that has helped sustain Chinese economic momentum this year still can’t offset its domestic woes, particularly in its stock market.

Since peaking in June, key Chinese indexes have fallen more than 20%, crossing the threshold for a bear market. Beijing responded last week by pumping $19 billion into exchange-traded funds, according to Bloomberg data, its biggest intervention since early 2025, when US President Donald Trump’s tariff offensive roiled global markets.

But analysts say interventions like this may do little to arrest the persistent slide, amid weak consumer spending and concerns over a possible bursting of the AI bubble. On Thursday, China’s benchmark CSI 300 index of stocks listed in Shanghai and Shenzhen closed down 1%.

Even national tech champions that have helped fuel a record trade surplus this year could not escape the crash. Shanghai’s STAR50 index, composed of China’s homegrown AI and chip leaders, has plunged more than 40% since a June peak.

Meanwhile, shares in the world’s largest humanoid robot maker by sales Unitree, which surged 600% in its Shanghai debut in August, have halved, and the valuation of memory chipmaker CXMT, which became Shanghai’s top weighted stock three months after listing, has fallen by nearly 30% since its August peak.

“The selloff reflects a repricing of crowded AI trades, weak domestic demand, and the lack of stimulus,” said Gary Ng, senior economist for Asia Pacific at Natixis Corporate and Investment Bank.

The meltdown of stocks also extended to Hong Kong, where the benchmark Hang Seng index has plummeted more than 12% this year. Together with Indonesia and India, stocks in China have emerged as the worst performers in the region this year.

Ng explained that Hong Kong faces pressure through its exposure to Chinese companies and selling by mainland investors. Beijing’s increasing scrutiny of cross-border investments and tightening of offshore tax rules also contributed to the plunge, he said.

“Any measure to address the stock market sentiment tends to be short-lived if there are no policies to address underlying key issues,” said Lorraine Tan, director of equity research in Asia at Morningstar, a financial services firm.

“There are imbalances in China’s economy, including excess capacity in many sectors, that need to be addressed. The lack of fiscal spending this year has also been a drag,” she said, adding that measures are needed to boost domestic consumption.

China’s stock rout offers a cautionary tale as investors and analysts warn that an abrupt collapse of the debt-fueled AI boom could send tech stocks, which have soared this year, tumbling worldwide.

For now, China’s equity sell-off is unlikely to trigger significant spillovers into global markets, experts said. Strict controls on capital flows limit foreign investors’ participation in Chinese markets, reducing the possibility that turmoil could spread internationally.

Still, within China, the selloff is hitting some retail investors at one of the worst possible times.

While demand for AI chips and hardware worldwide has accelerated Chinese exports this year and lifted the country to expectation-beating third-quarter growth, stagnant domestic consumption and a prolonged housing market downturn continue to drag.

About 70% of Chinese household wealth is tied up in property. But since the sector began unravelling five years ago, household savings have remained trapped in falling assets, driving some capital into the domestic stock market. However, with Beijing tightening restrictions on offshore trading to curb capital flight in recent months, mainland retail investors face increasingly limited options.

“Chinese equities have generally underperformed most markets this year, and this could contribute to a negative wealth effect that further softens household confidence,” said Lynn Song, chief economist for Greater China at Dutch bank ING.

At a financial forum in Beijing last week, Wu Qing, chairman of the country’s market regulator, vowed to prioritize stability and “do everything possible to maintain the safety and stability of the capital market.”“We will also encourage eligible listed companies to step up share buybacks and increase their holdings of their own shares, delivering better returns to investors,” he added.