Chinese stocks fell to a one-year low amid rumors of Nvidia's return

During trading on September 28, Chinese stocks hit a one-year low: the CSI 300, the benchmark index for the mainland market, fell 2.6%, although it recovered some of its losses by the end of the trading day. Among the worst performers were chipmakers Cambricon Technologies and GigaDevice Semiconductor, as well as optical equipment manufacturers Zhongji Innolight and Eoptolink Technology. The decline in the Shanghai Star50 blue-chip index—which has a high concentration of chipmakers—was the steepest in a month, according to Bloomberg.

Investor sentiment deteriorated following a report by The Information: Beijing has signaled that it may allow local companies to purchase new Nvidia chips. This could intensify pressure on Chinese manufacturers, who are already facing fierce domestic competition, according to Bloomberg. Nvidia’s stock price also fell by nearly 1% in premarket trading on September 28 in the U.S.

Another reason for the sell-off may have been a bill introduced by U.S. senators to restrict government procurement of products from Chinese manufacturers of high-speed optical modules for data centers—Innolight and Eoptolink. Commenting on the bill imposing restrictions on these two companies, Global X Management investment strategist Billy Luen said: “Their direct impact on profits is limited, but this shows that restrictions in the technology sector and diplomacy are taking different paths” (quoted by Bloomberg).

Shares of Chinese AI equipment manufacturers, which were in demand at the beginning of the year, have yet to recover from the July sell-off. Investors remain skeptical about the validity of these companies’ valuations amid fierce competition in the domestic market, according to Bloomberg.

Data released on September 28 showed that profit growth at Chinese industrial enterprises slowed to 4.2% in August from 11.2% in July. This is the worst figure since November 2025, according to Trading Economics. Reuters notes that weak domestic consumption and excess capacity in a number of industries are making it difficult for Chinese companies to maintain prices.

Actively managed funds that do not engage in short selling have, on average, held Chinese stocks at a level commensurate with their weight in benchmark indices since June, Bloomberg reports, citing data from Bank of America. Over the past four years, their holdings had been below that level. However, the agency emphasizes that this shift in fund strategy does not yet signal a widespread bet on the growth of Chinese stocks.

"Selling pressure is nearing a low, and investors' attention is shifting from portfolio composition to companies' financial results," said Gary Tan, a portfolio manager at Allspring Global Investments, adding that his firm is selectively increasing its exposure to Chinese stocks. “For the situation in the Chinese market to improve, global investors don’t necessarily need to become staunch optimists: perhaps it’s enough simply to stop reducing their exposure (the share of Chinese stocks in their portfolios— Oninvest),” the fund manager said.

This article was AI-translated and verified by a human editor