On January 16, the chip sector experienced a significant drop, leading various ETFs associated with chips and semiconductors to feature prominently on the list of stocks that declined the mostThe sharp decline in these stocks raised eyebrows among investors and market analysts alike.

The leading faller, Cambricon Technology, saw its trading volume exceed 10 billion CNY in the afternoon sessionBy the close of the trading day, its share price plummeted over 14%, resulting in a staggering one-day market capitalization loss exceeding 40 billion CNYSimilarly, Haiguang Information also faced a steep decline, dropping over 9% by the end of the dayThese two stocks, often referred to as part of the "three treasures of science and technology innovation," underscored the challenges facing the chip sector todayMoreover, other stocks like Runxin Technology, TaiLing Micro, Jiehuate, and Lexin Technology also reported declines exceeding 6%.

These prominent stocks had a substantial impact on related ETFs, which also fell in value

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It was noteworthy that some newly launched products, which had been on the market for less than a month, saw their prices plummeting to the level of "0.9 CNY." This unexpected downturn indicates a concerning trend, as it appears that since the beginning of the year, various ETFs linked to the ChiNext chip sector, including Kizuna 50 and 100 ETFs, have experienced significant net outflowsExisting products are faced with investors seeking to lock in profits, while new ETFs laden with chip sector investments continue to enter the market.

The decline in the chip sector had a cascading effect on several ETFsMany of the non-cash ETFs that suffered the highest losses today were predominantly influenced by significant declines in heavyweight stocks such as CambriconThe Guolianan Science and Technology Innovation Chip Design ETF is currently the only listed ETF linked to the Shanghai Stock Exchange’s ChiNext chip design theme index

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The top three constituent stocks of this index are Cambricon, Haiguang Information, and Lankai Technology.

Today’s downward pressure also hit Cambricon, which evaporated more than 40 billion CNY in market capitalization, retreating to a total market cap of 247.969 billion CNY and a share price that fell back to 594 CNYInterestingly, the Guolianan Science and Technology Innovation Chip Design ETF was newly established, having just commenced trading on December 26 of last yearFollowing a significant rise in Cambricon’s stock, this ETF even recorded a single-day net value increase exceeding 5%. Unfortunately, with today’s downward trend, its closing price in the secondary market had plummeted to 0.924.

In addition to this ETF, multiple ChiNext chip ETFs linked to indices based on the Shanghai Stock Exchange’s chip index also reported considerable losses today, with Cambricon again represented among the leading consultancy stocks

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The top-weight stocks in this index also include Semiconductor Manufacturing International Corporation (SMIC), Haiguang Information, and Hengxuan Technology, all of which experienced declines today as well.

According to the CSI full circuit integrated circuit index, the dominant stocks include SMIC, Cambricon, and Haiguang InformationETFs tied to this index, like the Harvest Integrated Circuit ETF and the Guotai Integrated Circuit ETF, also saw declines exceeding 2.6% todayOther ETFs related to indices, such as the Shanghai Stock Exchange ChiNext New Generation Information Technology Index and the Shanghai Stock Exchange ChiNext Artificial Intelligence Index, faced similar fates, as Cambricon appeared among the top three constituents.

A detailed examination of the top ten floating shareholders of the plummeting chip stocks indicated a frequent presence of index fundsFor instance, as of Q3 2024, Haiguang Information's largest floating shareholder was the Huaxia Shanghai ChiNext 50 ETF

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Moreover, prominent funds such as E Fund's ChiNext 50 ETF, Huaxia’s Kizuna Semiconductor Chip ETF, Huaxia Shanghai 50 ETF, and Huatai-Pb’s CSI 300 ETF also ranked among the leading floating shareholders of this stock.

By the end of Q3 last year, four of the top ten floating shareholders in Cambricon were also listed ETFs, namely: Huaxia Shanghai ChiNext 50 ETF, E Fund’s ChiNext 50 ETF, Huaxia’s Kizuna Semiconductor Chip ETF, and Huatai-Pb’s CSI 300 ETF.

As shares faced declines, many related ETFs suffered from net redemptions in 2025. Data from Wind indicates that as of January 15, 2025, 12 non-cash ETFs had been net redeemed for more than 300 million shares, with Huaxia Shanghai ChiNext 50 ETF experiencing redemptions exceeding 1.1 billion shares, resulting in its scale shrinking from over 1 trillion CNY down to approximately 908.87 billion CNY.

Additionally, the Harvest Shanghai ChiNext Chip ETF saw net redemptions exceeding 500 million shares, while the Penghua and Yinhua Shanghai ChiNext 100 ETFs faced redemptions of more than 300 million shares each

Looking at the pertinent indices, the ETFs linked to the ChiNext chip index experienced significant capital outflows, exceeding 1.016 billion CNY since the beginning of 2025, placing them amidst other underperforming indices like SGE Gold 9999 and Heng Seng Technology.

The Kizuna 100 and Kizuna 50 indices ranked among the core broad indices with substantial outflow funds, with net redemptions of 863 million and 593 million CNY, respectivelyDespite the capital outflows from existing chip sector-related indices, specific ETFs showed a heightened trading activity todayFor instance, the Huaxia Shanghai ChiNext 50 ETF recorded a transaction volume of around 5.078 billion CNY, an increase of over 1 billion CNY from the previous trading day, while the Harvest Shanghai ChiNext Chip ETF also saw a trading volume reaching approximately 3.663 billion CNY.

While funds continued to flow out of the existing chip sector index funds, new ETFs are on the horizon

Anticipated to launch officially on January 20, the new Shanghai ChiNext Comprehensive Index includes Cambricon, Haiguang Information, among others within its sample list as it embarks on its journeyThe first batch of 12 ChiNext comprehensive index ETFs has already been reported.

Various index funds relating to the ChiNext chip, ChiNext 50, and ChiNext Artificial Intelligence indices are being introduced by fund companies while this year also witnessed the establishment of a ChiNext 50 ETF, two ChiNext Artificial Intelligence ETFs, and two CSI A500 ETFs, with top holdings including stocks from the chip sector such as CambriconIn addition, numerous ETFs linked to the ChiNext New Generation Information Technology Index and the CSI A500 Index are still in the process of issuance.

Despite undergoing a downturn, several institutions remain relatively optimistic about the future performance of the chip sector

Fangzheng Fubon Fund has suggested that the semiconductor sector’s struggles on January 16 were likely tied to American pressure on the Chinese mainland semiconductor industryThey predict ongoing geopolitical pressures will accelerate the development of domestic supply chainsThe trend toward domestic substitution appears to be gaining traction, with particular urgency for cutting-edge technology fields such as artificial intelligence and advanced processes.

In their analysis, they highlight that Chinese leading artificial intelligence chip companies and their allied supply chains will continue to benefit from this domestic substitution trend, potentially leading to an uptick in both performance and valuationFurthermore, they recommend closely monitoring the semiconductor equipment manufacturing chain, emphasizing that breakthroughs in foundational manufacturing equipment are essential for radical advancements within the entire artificial intelligence industry.