Baidu, Alibaba lead Chinese tech rally to 4-year high: what this rally means for investors
News Summary
Baidu and Alibaba are leading one of the most exciting rallies in Chinese tech shares in years, pushing the sector to heights not seen since 2021. As of mid-September 2025, these two giants have captured investor attention with aggressive moves in Artificial Intelligence (AI), refreshed growth plans, and the allure of vast future opportunities. The Hang Seng Tech Index has climbed over 3%, driven by Baidu, Alibaba, JD.com, and Meituan, signaling a strong return of confidence to China’s tech space after several choppy years. AI is the primary engine behind this surge. Baidu has garnered headlines with its advanced ERNIE AI model and a significant push towards using self-made AI chips for training, boosting its tech prowess and reducing reliance on foreign suppliers. Baidu's AI cloud revenue soared 42% year-on-year, indicating a successful shift from its traditional ad-based model to more stable, tech-centered revenue streams. Furthermore, Baidu’s autonomous driving service, Apollo Go, is rapidly expanding and nearing consistent profitability, adding long-term confidence. Alibaba is close behind, with its shares rising on news of using homegrown AI chips in its training projects, a major step in China’s AI arms race. Alibaba's cloud division grew 26% year-on-year, and its AI product sales have achieved triple-digit growth for eight consecutive quarters. It's clear Alibaba is evolving beyond e-commerce, becoming an AI and cloud solutions powerhouse. Both companies are now seen as leaders in China's growing AI revolution, with many expecting significant payoffs in the years ahead. This rally injects optimism for investors who have been cautious amid years of Chinese regulatory crackdowns, trade tensions, and economic uncertainty. Baidu and Alibaba reaching their highest stock prices since 2021 demonstrates a positive shift in investor sentiment. Despite hurdles, there's a growing belief that China’s tech giants can lead in AI developments. While risks remain, their valuations appear attractive compared to many US tech giants, especially given China's massive market and government backing for AI growth.
Background
Between 2021 and 2024, China's tech sector faced significant headwinds, including stringent regulatory crackdowns, escalating trade and technology tensions with the United States, and broader macroeconomic uncertainties. These factors collectively eroded investor confidence and led to a prolonged downturn in tech stock valuations for many Chinese giants. Against this backdrop, the Chinese government has actively promoted technological self-sufficiency, particularly in semiconductors and artificial intelligence, aiming to reduce reliance on external supply chains. The current stock rally for companies like Baidu and Alibaba, occurring as they demonstrate substantial progress in proprietary AI chip development and AI model commercialization, suggests a market re-evaluation of China's indigenous tech innovation capabilities and strategic shifts supported by the government.
In-Depth AI Insights
Does this rally solely represent a short-term sentiment rebound, or does it signal a deeper transformation in China's tech strategy? This surge transcends mere sentiment, reflecting how China's strategic determination for AI and semiconductor self-sufficiency is translating into tangible market value. The breakthroughs by Baidu and Alibaba in proprietary AI chips and models are not just technological feats; they are critical steps for China to reduce reliance on Western technology and achieve a "dual circulation" development pattern. This state-backed technological advancement grants these companies resilience beyond short-term market fluctuations, heralding a more autonomous and organically growing tech ecosystem. Given the continued tech restriction policies from the Trump administration, how do Chinese tech giants balance globalization with localization strategies? - Under persistent tech restrictions from the Trump administration, Chinese tech giants are increasingly adopting a "localization first" strategy to ensure the resilience of core technologies and supply chains. This involves investing heavily in proprietary AI chips, operating systems, and foundational software, as well as building domestic ecosystems. - Simultaneously, they are not entirely abandoning globalization. For example, by expanding business in markets along the "Belt and Road" initiative like Southeast Asia and the Middle East, or seeking cooperation with non-Western countries, they aim to circumvent direct conflicts in major Western markets and achieve a form of "de-risked" globalization. - The core of this balancing act is to ensure a solid domestic foundation while cautiously seeking international expansion opportunities, rather than pursuing them blindly. This might lead to their global business models becoming more fragmented and regionally focused. What are the implications of this tech stock rally for Hong Kong's status as an international financial center? - A sustained strong rebound in Chinese tech stocks will significantly enhance Hong Kong's appeal as an international fundraising and trading platform for Chinese tech giants. The robust performance of the Hang Seng Tech Index helps attract more international capital to the Hong Kong market. - This could also encourage more Chinese tech companies to list in Hong Kong rather than the US, further solidifying Hong Kong's unique position in connecting mainland Chinese capital with international markets, especially amidst increasing geopolitical uncertainties. - However, its long-term impact will still depend on whether Hong Kong's market liquidity, regulatory framework, and connectivity with mainland capital markets can be continuously optimized to navigate an increasingly complex global financial landscape.