Chinese IT Stocks in Hong Kong Surge 20% After DeepSeek’s Breakthrough
The Hong Kong stock market is experiencing a rally in Chinese tech stocks, which have surged over 20% in a month. Leading IT giants have posted strong gains following the breakthrough of DeepSeek, a Chinese startup that unveiled an AI model competitive with Western alternatives.
Reasons for Growth
The Hang Seng Tech Index, which tracks 30 of the largest Chinese tech firms, has risen 25% from its January 13 low. By the close of trading on February 12, it reached 5,281.18 points (+2.7%).
Over the past month, Hang Seng Tech outperformed the Nasdaq 100 by 4.4% and surpassed the "Magnificent Seven" (leading U.S. tech companies) by 0.5%. Meanwhile, the Hang Seng China Enterprises Index gained 15%.
One of the main drivers of this surge was the success of DeepSeek. The company introduced an AI model that rivals Western counterparts in power but is significantly cheaper to train. This led investors to reconsider their stance on Chinese IT stocks, fueling capital inflows.
Additionally, mainland investors have shown increasing interest in Hong Kong-listed stocks. The Stock Connect program, which allows Chinese traders to invest in Hong Kong, recorded a notable increase in daily trading volume:
— 66% higher than in January;
— Three times higher than the same period last year.
Market Reaction
Chinese tech stocks have surged significantly:
— Alibaba (NYSE:BABA) +43% in a month.
— Xiaomi (HK:1810) +34%.
— Baidu (NASDAQ:BIDU) +13%.
— EV manufacturer BYD +40%.
According to Bush Chu, an investment manager at Abrdn, Chinese IT companies are capable of competing globally and catching up with the "Magnificent Seven".
Impact on the U.S. Market
The U.S. stock market saw a sharp decline in major tech stocks.
On January 27, Nvidia (NASDAQ:NVDA) lost $589 billion in market capitalization—the largest single-day drop in U.S. stock market history.
That same day, Chinese IT stocks saw a strong rally.
Outlook
China’s IT sector is showing strong momentum, despite U.S. tariffs and domestic economic challenges. Investors expect further advances in Chinese AI development and rapid adoption by consumer-oriented companies.
The future trajectory will depend on government regulations, U.S. policy responses, and global tech competition.
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