Two major Chinese hedge funds believe that AI-related stock valuations have become disconnected from underlying business fundamentals, increasing the risk of a significant market correction. While the warning highlights growing concerns over excessive valuations, it does not suggest that artificial intelligence as a technology is losing momentum or that a market downturn is inevitable.
Chinese hedge funds Wealspring Asset and Shanghai Banxia Investment Management Center have warned that the rapid surge in artificial intelligence-related stocks has created a “super bubble” that may be approaching a sharp correction. The warning, reported by Bloomberg, was outlined in letters sent to investors, raising concerns over excessive market valuations.
Wealspring, which manages more than USD 1.4 billion in assets, argued that many AI infrastructure companies lack sustainable competitive advantages and require continuous capital investment to maintain growth. Banxia stated that early signs of the bubble beginning to deflate are emerging, citing a slowdown in Anthropic’s annual revenue growth as one indicator. The fund also suggested that some highly valued AI stocks could decline by more than 80%, although it did not identify specific companies. Meanwhile, China’s AI equity index has gained more than 35% this year but continues to trail the performance of several other global technology markets.
The warning may influence global investor sentiment toward AI-related assets by shifting attention from rapid valuation growth to long-term profitability and business sustainability. However, the assessment reflects the views of a limited number of hedge funds and should not be interpreted as a market-wide consensus or confirmation of an imminent collapse.