Hong Kong stocks fall as AI bubble fears grow amid Wall Street retreat
News Summary
Hong Kong stocks declined on Wednesday, mirroring Wall Street's retreat from record highs amidst growing concerns that the artificial intelligence (AI) boom may have overheated and risks turning into a bubble. The Hang Seng Index closed 0.5% lower at 26,829.46, while the Hang Seng Tech Index lost 0.6%. Mainland Chinese stock exchanges were closed for a week-long public holiday and are set to reopen on Thursday. Individual tech giants like Baidu slumped 3%, Meituan declined 1.8%, Alibaba dropped 1.6%, and JD.com slipped 1.2%. EV maker Li Auto fell 0.8%, Pop Mart International lost 0.6%, and Kuaishou Technology slipped 2.2%. However, gains in carmaker BYD (up 1.5%), Geely Automobile Holdings (up 3.4%), digital health services provider JD Health International (up 3.1%), and property developer Sun Hung Kai Properties (up 1.2%) helped to limit the overall market losses. Overnight, the S&P 500 Index lost 0.4% and the Nasdaq Composite Index declined 0.7%, as investor enthusiasm for AI waned following media reports that Oracle's Nvidia-backed cloud services had delivered only slim margins over the past year, fueling bubble concerns.
Background
Global financial markets experienced a significant rally from 2023 into early 2025, largely driven by breakthroughs in artificial intelligence technology and strong performance from associated companies, particularly chipmaker Nvidia. Investor expectations for future AI growth propelled tech stock valuations to new heights, pushing major Wall Street indices to record levels. Hong Kong's stock market, especially its technology sector, is closely tied to US market performance, particularly regarding global tech sector sentiment. Mainland China's stock exchanges typically close for major public holidays, and their reopening performance often draws significant market attention.
In-Depth AI Insights
What is the core impact of reports on Oracle-Nvidia partnership's weak profitability on the broader AI narrative? - This report directly challenges the market's optimistic expectation that AI applications can quickly translate into high profits. If even a leading cloud service provider partnering with a top AI chip company can only achieve “slim margins,” the entire AI ecosystem’s profitability model may need re-evaluation. - This isn't just an issue for specific companies; it likely indicates that AI infrastructure development entails immense capital expenditure, and its commercialization and monetization pathways still face efficiency challenges, potentially compressing long-term profit margins for future AI-related services. What defensive strategies do investors reflect in the divergence between declining tech stocks and rising traditional sectors in the Hong Kong market? - This divergence suggests that as global AI bubble fears spread, investors are shifting from high-valuation growth-oriented tech stocks towards traditional sectors with more stable cash flows, relatively reasonable valuations, or those benefiting from other macro factors. - In the Hong Kong market, this could mean capital is flowing into more defensive sectors or those more relevant to China's economic recovery themes, such as local service industries benefiting from post-pandemic consumption rebound (e.g., JD Health) or policy-supported manufacturing (e.g., BYD, Geely), as well as stable property sectors (e.g., Sun Hung Kai Properties). What does any substantial shift in US AI sentiment mean for Asian (especially Greater China) tech markets? - Given the central role of Greater China tech companies in the global AI supply chain and application market, any valuation correction or sentiment shift in the US market regarding AI will rapidly transmit and amplify into Asian markets. - This could lead to capital withdrawal from high-growth, high-valuation Asian tech stocks, redirecting it towards value or more defensive assets. For Asian tech companies relying on the AI narrative to sustain their high valuations, this signals a more challenging capital environment and stricter scrutiny of profitability. - Furthermore, if the AI bubble bursts, global technology investment could slow, impacting long-term investment and progress in AI R&D and industrial upgrading across Asia.