China's CSI AI index up nearly 3%, reverses earlier losses

China's CSI AI index up nearly 3%, reverses earlier losses

China's CSI AI index rebounded significantly on September 2, 2025, reversing earlier losses by nearly 3%. This reversal comes after a series of market uncertainties and geopolitical tensions that had previously weighed on the index. The index had experienced notable declines amidst growing geopolitical tensions and market uncertainties, particularly in the semiconductor sector [1].

The semiconductor index, which had fallen by 5%, can be attributed to several factors. The U.S. has recently increased pressure on Korean semiconductor companies, threatening to withdraw the "Validated End-User (VEU)" status granted to Samsung Electronics and SK Hynix's Chinese subsidiaries [1]. If the VEU status is revoked, Korean companies will have to obtain U.S. Department of Commerce export permits for each instance of bringing advanced U.S. semiconductor equipment into their Chinese operations, potentially forcing them to produce only legacy memory semiconductors in China.

The AI index, on the other hand, had been impacted by intense competition in the Chinese AI market. Despite the growth in AI-related product revenue and sales in the cloud division, Alibaba's stock had been affected by the fierce competition with rivals in the e-commerce sector, including JD and Meituan [2]. The AI sector's rapid growth had not been enough to offset the losses from meal delivery and instant commerce, which had been margin-eroding for Alibaba.

The Korean government has responded to these challenges by announcing plans to lower tariffs on major imported materials used in semiconductor wafer production to 0% next year [1]. This move aims to enhance the basic cost competitiveness of domestic semiconductors and alleviate the burden on Korean semiconductor companies. However, experts argue that more bold government industry support is needed. The government's direct financial support is less than half of the proposed additional budget of 33 trillion won for the comprehensive semiconductor support package [1].

In conclusion, the rebound in China's CSI AI index reflects the complex interplay of geopolitical tensions, market uncertainties, and intense competition in the semiconductor and AI sectors. The Korean government's tariff reduction plan may provide some relief to Korean semiconductor companies, but more comprehensive support measures are needed to address the challenges facing the industry.

References:
[1] https://www.communicationstoday.co.in/korea-considers-zero-tariff-on-semiconductor-wafer-materials/
[2] https://www.livemint.com/market/stock-market-news/alibaba-shares-jump-15-as-company-rides-chinas-artificial-intelligence-growth-wave-11756693670324.html