An index tracking major US-listed Chinese companies fell 1% on Thursday, dragged down by a sharp selloff in biotechnology shares and renewing concerns about the sector's volatility. The Livermore China Concept Stock Leader Index closed at 10,228.46 points on May 9.
"The broader takeaway is that Chinese AI has likely graduated from a risk to monitor to a market to understand," Harrison Rolfes, senior research analyst at PitchBook, said recently, highlighting a major performance divergence. While US-listed Chinese stocks falter, their AI-focused peers are seeing record-breaking IPOs in Hong Kong.
The selling pressure was concentrated in specific names. Regencell Bioscience (NASDAQ: RGC) plunged 8.01%, and Zai Lab (NASDAQ: ZLAB) lost 6.5%. The weakness extended to other growth-oriented stocks, with warehouse logistics firm GigaCloud Technology (NASDAQ: GCT) down 4.76% and autonomous driving company Pony.ai also declining.
The drop underscores a complex dilemma for investors. While some Chinese firms demonstrate robust growth, persistent macroeconomic headwinds from China's property sector and a clear shift in investor capital towards AI "national champions" in Hong Kong are creating significant performance gaps for US-listed names.
The weakness in US-listed Chinese stocks stands in sharp contrast to the booming market for artificial intelligence firms in Hong Kong. According to PitchBook data, Chinese AI companies accounted for over $22 billion in exit value in the first quarter, dominating listings in the city. This enthusiasm is partly fueled by what analysts call a "national champion premium" as investors rally behind domestic technology leaders.
Meanwhile, many US-listed Chinese and even domestic US tech companies have struggled. PitchBook's Rolfes noted that public markets appear to be treating AI as a "displacement risk" for incumbent software and tech models, a phenomenon some have dubbed a "SaaSpocalypse." This has led to a historic underperformance for the median US IPO, which has lagged its benchmark by 42 percentage points within 120 days of listing.
The targeted selling also reflects deep-seated concerns about China's broader economy. The country's real estate sector is undergoing a "historic transition" away from a high-leverage growth model, according to Sheng Songcheng, a former director at the People's Bank of China. In a recent commentary for China Daily, he noted that falling property values have weakened balance sheets and dampened consumer demand.
This economic pressure encourages investors to minimize risk rather than maximize profit, leading to selloffs in higher-risk growth stocks. The decline in the Livermore Index occurred as the U.S. 10-year Treasury yield held firm above 4.45% and the Dollar Index (DXY) remained elevated, adding further pressure on international equities. Stabilizing China's housing market is now seen as crucial for restoring broader investor confidence.
This article is for informational purposes only and does not constitute investment advice.
