Recent optimism in the Hong Kong stock market, driven by a trading logic known as "TACO (Trump Always Chickens Out)," has led to a notable rally, with the Hang Seng Index futures surging over 3% during the night session. However, in stark contrast, the Hang Seng Tech Index has failed to follow suit, leaving many investors puzzled.
The Hang Seng Tech Index tracks the 30 leading technology companies listed in Hong Kong, including giants like Tencent, Alibaba, Xiaomi, NetEase, and Baidu. Often regarded as the Hong Kong equivalent of the Nasdaq, the index is known for its high volatility and strong growth potential, serving as a key benchmark for China's technology and internet sector.
As the earnings season for Hong Kong-listed tech and internet leaders unfolds, a consistent pattern has emerged across company reports: revenue continues to grow, while profits face mounting pressure. For instance, several top firms reported cloud business revenue growth of approximately 30% to 40% year-over-year, with advertising and gaming segments maintaining steady expansion. However, overall profit growth has lagged significantly behind revenue growth, and in some cases, even declined temporarily.
This divergence can be attributed to a sharp increase in investments related to artificial intelligence (AI), which has driven up costs in the short term. Although revenue streams are improving, they have not yet fully offset the financial impact of these expenditures. In broader terms, the core challenge for the tech and internet sector has shifted from simply possessing AI capabilities to determining when these investments will translate into tangible revenue and profits. This indicates that market sentiment is evolving from speculative "AI-driven valuation spikes" to a focus on actual financial performance.
Two key developments highlight the progress of AI within the Hang Seng Tech Index:
First, AI demand is transitioning from conceptual to practical applications. Rather than merely evaluating the sophistication of AI models, market participants are increasingly focused on monetization and implementation. New product forms such as AI Agent and OpenClaw are emerging, leading to a surge in model usage and driving demand for cloud computing services. Cloud platforms are evolving from basic infrastructure into revenue-generating assets based on usage-based pricing.
Second, a comprehensive commercial ecosystem is taking shape. Major internet platforms are shifting their business models from being mere AI model providers to building integrated chains that combine model development, computing power, cloud resources, and talent acquisition. This end-to-end approach offers stronger monetization potential and higher barriers to entry compared to standalone AI model suppliers. Industry data suggests that global API calls for large AI models will reach trillions by 2025, indicating substantial commercial opportunities for AI applications.
In summary, the recent fluctuations in the Hang Seng Tech Index reflect a market correction toward rationality, adjusting sector valuations to more reasonable levels.
So, how should investors assess the index's investment appeal at this stage?
Following the adjustment, the Hang Seng Tech Index's valuation percentile relative to global tech sectors stands at 27%, indicating a relatively low level. Historically, after periods of growth, the index often experiences such valuation corrections and expectation resets. While this process may involve short-term volatility, it lays the groundwork for future price movements. For long-term investors, this may present an attractive entry point. One potential instrument for gaining exposure is the E Fund Hang Seng Tech ETF (513010, with feeder fund classes A/C: 013308/013309). According to Wind data, this ETF has seen net capital inflows for five consecutive trading days and currently manages over 30 billion yuan in assets, offering investors a vehicle to capture potential profit recovery among tech leaders.
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