The stock market saw a sharp decline today, with major indices closing deep in the red. As of the close, the Shanghai Composite Index dropped 2.45%, the Shenzhen Component Index fell 3.41%, and the ChiNext Index plunged 4.02%.
Only 354 stocks advanced, with 33 hitting the daily upper limit, while 5,072 stocks declined, including 99 that hit the lower limit.
Despite the broader sell-off, AI application-related stocks bucked the trend, with companies like Visual China and Joinsoft surging to the daily limit. The defense sector also showed pockets of strength, with Longxi Group and Jiuzhiyang posting notable gains.
On the downside, lithium mining stocks suffered heavy losses, with Tianqi Lithium and Ganfeng Lithium among the many that tumbled to the lower limit. The memory chip sector also saw significant corrections, with Demingli and Dagang shares dropping sharply.
**What Triggered the Sell-off?** The sharp decline was not limited to Chinese assets—Asian markets broadly plummeted. The primary driver appears to be the overnight plunge in U.S. stocks, coupled with a sell-off in cryptocurrencies, as Bitcoin fell below $86,000, further dampening market sentiment.
Concerns over inflated valuations and heavy capital expenditures in the tech sector weighed on the market, with Nvidia—the AI bellwether—dropping 3.2% despite its earlier optimistic earnings outlook. Additionally, recent cautious remarks from multiple Federal Reserve officials regarding premature rate cuts have fueled uncertainty about further easing, exacerbating investor unease.
Analysts noted, “Doubts about the sustainability of the AI boom have pressured markets this week, cooling investor enthusiasm. While volatility has risen, most analysts view this pullback as a technical correction rather than the start of a prolonged downturn.”
The overnight U.S. market crash left Wall Street puzzled, with no clear consensus on the trigger. Some traders pointed to renewed skepticism over whether AI projects can generate sufficient revenue to justify massive investments. Others cited an unexpectedly strong but delayed September jobs report as evidence that the Fed’s rate-cutting cycle may have peaked. Bitcoin’s slide to a six-month low was also seen as a signal to reduce exposure to risk assets, dragging down equities. Elevated stock valuations and heightened volatility ahead of Friday’s options expiration added to the pressure.
Regardless of the exact cause, the sudden downturn dashed hopes of a sustained rebound from recent highs. Initially, Nvidia’s stellar earnings and Walmart’s strong quarterly update—showing resilient consumer spending—had seemed enough to propel markets higher. However, these gains were quickly erased by an abrupt wave of selling.
