China's 'NASDAQ moment': STAR 50 index outpaces CSI 300 by 30 percentage points

The AI investment boom is reshaping China's benchmark indexes. The STAR 50 — heavily weighted toward semiconductors, AI and advanced technology stocks — is emerging as a new standard-bearer for China's economy and equity markets, displacing the finance-, manufacturing- and consumer-oriented CSI 300.

According to Bloomberg, the STAR 50 has outperformed the CSI 300 by roughly 30 percentage points this year. Analysts say the shift mirrors how NASDAQ, driven by AI investment enthusiasm, came to dominate US markets — Chinese investors are increasingly turning away from traditional industries toward high-tech companies.

The STAR Market was launched on the Shanghai Stock Exchange in 2019, modeled after NASDAQ, as a dedicated venue for science and technology stocks. The STAR 50, which tracks the market's 50 most representative companies, has an IT sector weighting of 86 percent.

The CSI 300, long regarded as China's flagship equity index, is composed of 300 large-cap stocks listed in Shanghai and Shenzhen and carries a relatively heavy weighting in traditional sectors such as finance, manufacturing and consumer goods.

Behind the widening gap between the two indexes lies China's push for technological self-reliance. As the US-China rivalry over technology supremacy intensifies, Beijing has poured enormous resources into semiconductors, AI and advanced hardware, sending share prices of related companies sharply higher.

Goldman Sachs said in a recent report that the divergence between China's major indexes "reflects the global trend of overweighting infrastructure supply companies underpinning the AI boom," and described the STAR 50 as "a proxy for China's onshore AI hard-tech sector."

Shi Junbo, a fund manager at Hangzhou Xiyan Asset Management, said the STAR 50 "will be a very attractive investment destination for those who trust China's ability to design, manufacture and mass-produce superior technology products and adapt quickly to global industry trends."

A string of major technology IPOs is also raising the STAR 50's profile.

The index currently includes Moore Threads and MetaX, two of China's leading fabless chipmakers. CXMT, the memory chip company that listed on the Shanghai exchange last month, is widely expected to join the STAR 50 before year-end. CXMT's share price surged 470 percent on its first trading day, and the company has since become the largest listed company on China's mainland by market capitalization.

Unitree Robotics, a humanoid robot manufacturer that listed on the STAR Market on Wednesday, saw its shares soar roughly 460 percent on its debut.

The STAR 50 can also incorporate new technology companies more quickly than the CSI 300, allowing it to reflect shifts in the AI industry faster. The CSI 300 requires a stock to have been listed on the STAR Market for at least one year before it becomes eligible for inclusion, meaning Unitree is likely to enter the STAR 50 well before it qualifies for the CSI 300.

Beijing is also throwing its weight behind the STAR 50. Last month, China's state-backed national support fund concentrated its purchases on STAR 50-based ETFs rather than products tracking the CSI 300. Bloomberg interpreted the move as a signal that Beijing is prioritizing the stability of the technology-focused index.

The rapid price gains have fueled concerns about overvaluation, however. Bloomberg data show the STAR 50's 12-month forward price-to-earnings ratio stands at roughly 57 times — more than four times the CSI 300's approximately 14 times, and more than double the Philadelphia Semiconductor Index's roughly 22 times.

Strong government policy support underpins the elevated valuations, but analysts warn that any cooling of AI investment enthusiasm could trigger a sharp correction.

Shi cautioned that STAR 50 companies have yet to secure the "innovation premium" enjoyed by the world's leading technology firms, warning that "if market expectations around AI deteriorate, there is a risk of a sharp drop in valuations."