Chinese stock markets have lost $2.4 trillion in value since May as mounting concerns over artificial intelligence profitability and intensifying competition with the United States trigger a severe market downturn.

The STAR 50 Index, which tracks innovation and technology companies on the Shanghai stock exchange, has plummeted by 40 per cent since June, whilst the CSI 300 Index closed 1.8 per cent lower on Thursday, bringing its total losses from a high in June to 20 per cent.

AI companies now make up 42 per cent of the market value of Chinese shares listed on the mainland and in Hong Kong, and 57 per cent of trading, according to Goldman Sachs.

This concentration means when AI stocks fall, the whole market falls with them. The CSI 300, comprising China’s 300 largest listed companies, entered a bear market on 22 October, marking a decline of at least 20 per cent from its peak.

Despite Beijing’s substantial investment in the sector, including a newly launched 60bn yuan state-backed AI investment fund, the domestic economy lacks momentum to sustain the technology boom.