Hong Kong stocks fall for a third day, hurt by Meituan profit slump, Nvidia outlook
News Summary
Hong Kong stocks fell for a third consecutive day on Thursday, with the Hang Seng Index closing down 0.8% and the Hang Seng Tech Index shedding 0.9%. In contrast, mainland Chinese indexes, the CSI 300 and Shanghai Composite, both saw gains. Chinese on-demand services giant Meituan tumbled 12.6% after reporting worse-than-expected quarterly earnings. Its second-quarter net profit plunged nearly 97% year-on-year to 365.3 million yuan (US$51.1 million), despite a 12% increase in revenue. Meituan attributed the profit slump to “irrational competition” with Alibaba and JD.com, leading to price cuts to boost market share. Alibaba and JD.com also saw their shares decline by 4.7% and 5% respectively. Dickie Wong, executive director of research at Kingston Securities, noted that while Meituan aimed to avoid competition, it inevitably resorted to price cuts, negatively impacting the industry ecosystem and investor sentiment. The broader market sentiment was also weighed down by AI chipmaker Nvidia’s downbeat outlook and fierce price wars in the electric vehicle (EV) sector. Mainland China’s EV makers are similarly grappling with overcapacity and weak consumer sentiment.
Background
This article reports on the decline of Hong Kong stocks in August 2025, primarily driven by Meituan's profit slump and Nvidia's pessimistic outlook. Meituan is a leading Chinese on-demand services platform, with businesses spanning food delivery, hotel bookings, and bike-sharing, among others. Both the food delivery and electric vehicle (EV) sectors in China have historically faced intense competition. In recent years, major tech companies have entered these fields, escalating market share battles often at the expense of profitability. Nvidia, as a global leader in AI chip manufacturing, its performance and outlook are often seen as a crucial barometer for the health of the technology sector and the global economy.
In-Depth AI Insights
Does the current 'price war' in China's internet services and EV sectors signal deeper underlying market structural issues? Yes, this extends beyond mere short-term competitive tactics and reflects several fundamental problems: - Market Maturity and Saturation: After years of rapid growth, China's food delivery and EV markets are gradually maturing, with diminishing incremental growth opportunities, forcing companies into intense competition for existing market share. - Severe Homogenization: Most players lack significant product and service differentiation, making price the primary tool for attracting users and market share. - Inefficient Capital Deployment: The influx of substantial capital into emerging industries has led to overcapacity and excessive competition, universally pressuring corporate profitability and reducing returns on capital. What are the implications of Meituan's profit slump for the long-term investment value of Chinese internet giants? Meituan's case indicates that even market leaders struggle to maintain high-profit margins in hyper-competitive environments, prompting investors to re-evaluate the growth models and earnings sustainability of Chinese internet giants: - Fragility of Profit Models: Past models heavily reliant on subsidies and aggressive scale expansion are no longer sustainable. Future success will depend more on refined operations, technological innovation, and diversified revenue streams. - Regulatory and Antitrust Risks: Prolonged price wars could attract regulatory scrutiny over unfair competitive practices, leading to potential policy tightening. - Shifting Valuation Metrics: Investors may need to shift focus from user growth and market share to prioritize earnings quality, free cash flow, and shareholder returns. What are the potential ripple effects of Nvidia's downbeat outlook on the global tech supply chain, especially for the Asian semiconductor industry? Nvidia's pessimistic outlook, as a leader in the AI chip market, could have several impacts: - Slowing AI Hardware Demand: If Nvidia's cautious forecast reflects a broader softening in AI chip demand, it will directly affect its upstream suppliers, including wafer foundries like TSMC and memory chip manufacturers. - Inventory Adjustment Pressure: The entire supply chain, both upstream and downstream, may face inventory build-up and destocking pressures, impacting shipments and average selling prices (ASPs) in the coming quarters. - Capital Expenditure Cuts: Chipmakers might scale back their capital expenditure plans, which would negatively affect semiconductor equipment manufacturers. - Macroeconomic Signal: Caution from tech giants often foreshadows a broader economic slowdown, potentially heightening investor concerns about the global economic outlook.