Chinese ADR index falls 4% as tech selloff deepens globally

The Livermore China ADR Leaders Index fell 4% on Friday, tracking a global tech selloff triggered by Broadcom's disappointing forecast that dragged semiconductor stocks lower across markets. The index closed at its lowest level in three weeks, with declines concentrated in semiconductor and internet names.

Hesai Technology dropped more than 8%, the steepest decline among index components. Taiwan Semiconductor Manufacturing Co. slid 6%, while Alibaba Group Holding fell nearly 4% and Bilibili Inc. declined 3%. NetEase Youdao gained 1%, the only advancer in the session. The breadth of the selloff was notable — only one of the index's constituent stocks ended higher.

The selloff in Chinese ADRs mirrored a broader tech rout that swept through global equity markets. Broadcom's outlook, released after Thursday's close, pushed the Philadelphia Semiconductor Index down 3.8% and dragged the Nasdaq 100 lower by 1.9%. The weakness extended into Asian trading on Friday, with Japan's Nikkei 225 falling 1.5% and South Korea's KOSPI dropping 1.8%. The USD/CNH pair edged past 7.25 during the session, adding a currency headwind for China-exposed assets.

Semiconductor names bore the brunt of the selloff, reflecting the direct impact of Broadcom's AI-related demand concerns. TSMC's 6% decline was the largest drag on the index by weighting, as the chipmaker's ADRs are among the most heavily traded Chinese names on US exchanges. The stock had gained 18% year to date before Friday, making it vulnerable to profit-taking after the Broadcom news. Hesai Technology's 8% decline extended a losing streak for the lidar maker, which has faced headwinds from slowing EV demand in China and intensifying competition from domestic rivals.

For Chinese ADR investors, the 4% index decline compounds existing headwinds. The move represents one of the largest single-day drops for the index this year, reflecting both the global AI-driven de-rating in semiconductor names and persistent regulatory uncertainty for China-exposed equities. The simultaneous weakness in the yuan, with USD/CNH breaching 7.25, further pressured returns for renminbi-based investors holding US-listed Chinese stocks. The KraneShares CSI China Internet ETF fell 3.5% in sympathy, while the broader Invesco Golden Dragon China ETF dropped 3.8%.

Traders are watching for any stabilization in US equity futures ahead of Monday's open. The next catalyst will be Broadcom's earnings call scheduled for next week, where management is expected to provide further detail on AI chip demand trends and the outlook for its networking business. A sustained selloff in Chinese ADRs could also weigh on Hong Kong-listed tech names when the Hang Seng Index resumes trading, given the cross-listing correlation between many of these companies. The Hang Seng Tech Index has fallen 8% year to date, and further weakness in US-listed Chinese names could accelerate selling in Hong Kong.

The selloff also raises questions about the sustainability of the AI trade that has driven much of the rally in Chinese tech stocks this year. Chinese ADRs had gained 12% year to date before Friday's session, outperforming the broader US market, as investors bet on AI-related demand for Chinese semiconductor and cloud companies. Friday's decline suggests that optimism may be fading as global AI spending comes under greater scrutiny following Broadcom's cautious outlook. The next major test for the sector will come when TSMC reports its monthly revenue figures later this month, which will provide a clearer picture of demand trends.

This article is for informational purposes only and does not constitute investment advice.