Chinese stocks fall as chip sector selloff drags markets lower

Chinese stock markets ended sharply lower on Tuesday, with the Shanghai Composite falling 1.16% to 3,813.3 and the Shenzhen Component dropping 4.52% to 13,509.7, its lowest closing level since early April.

The decline was driven by a broad selloff in semiconductor stocks as investors grew concerned that heavy spending on artificial intelligence may take longer than expected to deliver meaningful returns, making current valuations appear stretched.

Market sentiment was also affected by recent developments in China's semiconductor industry, which highlighted the country's fast technological progress and the growing competition in the global chip market. Major chip-related stocks such as Cambricon Technologies, Zhongji Innolight, Eoptolink Technology, GigaDevice Semiconductor, and SMIC posted steep losses during the session.

Investors are now shifting their focus to the upcoming Politburo meeting later this week, where policymakers are expected to outline China's economic priorities and policy direction for the second half of the year.

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