China Loses Out on AI Boom as Stocks Trail by Most Since ‘01

The MSCI China Index has plunged 15% in 2026, marking the worst global performance after Indonesia and erasing gains from what had been a strong 2025 driven by artificial intelligence optimism.

The selloff represents the sharpest underperformance for Chinese equities since 2001, according to Bloomberg data tracking the MSCI gauge. The reversal comes despite China's efforts to position itself as a contender in the AI race, with last year's rally fueled by investor bets on domestic technology champions capturing market share in machine learning and related infrastructure.

The index's decline signals a broader reassessment of China's AI competitive position relative to U.S. and global peers. Regulatory headwinds, geopolitical tensions limiting access to advanced chip technology, and slower-than-expected commercialization of AI applications have dampened the 2025 enthusiasm that lifted Chinese tech names.

Indonesia's equity market remains the only major index performing worse than China this year, highlighting the concentrated nature of China's reversal rather than a broad emerging-market selloff.