The market capitalization of three major Chinese AI stocks evaporated by $34 billion in a single trading session.

The STAR 50 index, dominated by Chinese tech stocks, plummeted 30% from its July peak.

Innolight, Eoptolink, and Cambricon lost nearly $34 billion in market cap on Thursday alone. These companies have become among the biggest winners in China's AI sector.

Innolight has surged over 4,000% since 2023. Cambricon's market cap once broke through $147 billion in June.

They produce key hardware for AI data centers. Innolight is particularly exposed to the US market, which contributed more than 60% of its first-quarter revenue.

This exposure risk materialized on the very day Innolight made its Hong Kong debut.

It raised $6.8 billion through the city's largest IPO since 2019, but saw its stock price fall as much as 10% on its first day of trading.

Hedge funds holding these stocks exacerbated the decline by hastily reducing their positions; the stocks have fallen 18.6% this month, marking the largest monthly loss on record.

Sovereign wealth funds intervened via ETFs, helping tech stocks rebound.

Nevertheless, investors are still pulling capital out of these leading stocks that drive the entire sector.