China's tech index rides AI wave to 4 year high

Chinese technology shares rallied on Wednesday as renewed AI bets lifted a major Hong Kong index to a near four-year high.

The Hang Seng Tech Index rose 4.2% to its strongest close since November 2021. Baidu Inc. led the advance with a 16% gain, while Alibaba Group Holding Ltd., Semiconductor Manufacturing International Corp., and JD.com Inc. also climbed sharply.

The index has marked the 7th straight week in gains due to easing tensions between China and the United States along with rising confidence that large AI investments will begin to pay off. So far this year, the gauge has risen 42% according to Bloomberg.

“China tech leaders are visibly re-accelerating AI spend and product rollouts, models, robotaxis, in-house chips, while also proving they can monetize AI faster than many expected,” said Charu Chanana, chief investment strategist at Saxo Markets. “With valuations lagging the U.S., investors are starting to pay attention again.”

Valuations still below U.S. counterparts

On valuation, the Hang Seng Tech Index trades at about 21 times projected earnings, below its five-year average of 23.3 times and under the Nasdaq 100’s multiple of 27 times, Bloomberg data show.

If gains persist, capital could flow back to China after years of volatility from regulation and a weak post-pandemic economy. Interest in the sector has also been lifted by the surprise rollout of a DeepSeek AI model early this year, which spotlighted China’s push to compete in the global AI race.

Brokerage calls added fuel. Goldman Sachs increased its Alibaba price target, citing an improved outlook for the company’s cloud business. Arete Research moved Baidu’s ADRs to buy from sell, highlighting the promise of its internal chip program. Contemporary Amperex Technology Co. advanced this week after JPMorgan raised its rating on the stock.

Wednesday’s jump left the Hang Seng Tech Index ahead of other key Asian gauges, while traders elsewhere kept risk in check before the Federal Reserve meeting. An MSCI barometer of regional stocks was nearly flat late in Asia. Even with recent strength, the Hong Kong tech gauge would still need to rise about 70% to revisit its record from February 2021.

China’s largest internet and tech firms are in the midst of a heavy investment cycle for AI, racing both one another and U.S. rivals in a market expected to reshape daily life and work.

AI capital expenditures set to exceed $30 billion

Total capital spending by major companies such as Alibaba, Tencent Holdings Ltd., Baidu, and JD.com may reach $32 billion in 2025. It’s a big jump from 2023’s $13 billion spent, according to Bloomberg Intelligence.

That drive has set off active fundraising across equity and bond markets. Alibaba collected $3.2 billion last week through a sizable convertible bond sale. Tencent tapped the offshore yuan market on Tuesday, issuing 9 billion yuan ($1.27 billion) in so-called dim sum bonds, its first bond deal in four years.

As Cryptopolitan reported, China Unicom’s Sanjiangyuan data center signed agreements to deploy AI chips from domestic suppliers, including T-Head, Alibaba’s chip unit. CCTV said the update was shown to Premier Li Qiang during his visit to Qinghai earlier this week, the northwestern province that hosts the Sanjiangyuan site.

Separately, SMIC shares gained over 7% after a report said the firm is trialing China’s first domestically made advanced chipmaking equipment. Hints of progress in U.S.-China ties added to the upbeat tone. President Donald Trump said he will speak with Chinese leader Xi Jinping on Friday, and officials from both countries have set a framework to keep TikTok operating in the United States.

Attention now turns to an Alibaba Cloud event later this month, where investors hope to hear new details on the company’s AI development and commercial plans.

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