China Tech Stocks Surge to 2021 Level as Investors Bet on AI

(Bloomberg) — Chinese technology stocks listed in Hong Kong jumped to their highest level in almost four years as optimism over artificial intelligence fueled demand.

The Hang Seng Tech Index rose as much as 3.5% on Wednesday, hitting its highest level since November 2021, according to Bloomberg-compiled data. Search engine operator Baidu Inc led gains with a 16% jump but multiple tech giants came along for the ride: The shares of JD.com Inc, Meituan and Alibaba Group Holding Ltd. all surged in morning trading.

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The index is now set for its seventh consecutive week of gains, helped by easing tensions between China and the US as well as hopes that tech companies’ big bets on AI will pay off.

“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.”

Chinese tech stocks still trade well below their US rivals in terms of price-to-earnings, a key benchmark for investors. The Hang Seng Tech Index is trading at 20.5 times forward earnings, below the Nasdaq 100 Index’s ratio of 27 times earnings, according to Bloomberg-compiled data.

Big Spending

China’s biggest tech companies are in the middle of a huge spending spree on AI, as they race against one another and against US firms to conquer a market widely expected to revolutionize how people live and work.

Total capital expenditure from major Chinese internet firms such as Alibaba, Tencent Holdings Ltd., Baidu and JD.com is set to hit $32 billion in 2025, more than doubling from $13 billion in 2023, according to a Bloomberg Intelligence report.

That has helped fuel a funding spree in equity and bond markets. Alibaba raised $3.2 billion from a blockbuster convertible bond offering last week, while Tencent turned to the dim sum bond market for a 9 billion yuan ($1.27 billion) on Tuesday, its first bond sale in four years.

Read: Tencent, Baidu Sell Record Dim Sum Bonds for Cheap Funding

The latest news fueling optimism was a state television report Tuesday night that China Unicom’s Sanjiangyuan data center has signed contracts to deploy AI chips from Chinese firms including Alibaba’s chip unit T-Head.

That information was presented to Chinese Premier Li Qiang when he visited the northwestern province of Qinghai, home to the Sanjiangyuan site, earlier this week, according to state broadcaster CCTV.