Hong Kong stocks slide: Hang Seng down 1.15%, tech index drops 1.75%

Hong Kong stocks took a sharp hit on Tuesday, with the Hang Seng Index sliding 1.15% and the tech-heavy index dropping 1.75%. The sell-off was concentrated in two areas that had previously driven market euphoria: artificial intelligence concept stocks and semiconductor plays. Investors appeared to be recalibrating their bets, and the mood turned decisively risk-off. Large model concept stocks were among the worst performers. MINIMAX plunged 16%, while Zhipu AI fell 9%.

These companies had been darlings of the AI narrative, riding a wave of optimism around China’s ability to compete in the generative AI race. But the hype is now showing cracks. Profit-taking is one factor, but there is a deeper unease: monetization remains elusive for most large language model developers, and the market is starting to price that in. The question of when—or if—these firms will generate sustainable revenue is no longer being ignored. The semiconductor sector fared no better.

Hua Hong Semiconductor, SMIC, and Montage Technology all fell between 7% and 9%. The weakness reflects a dual pressure. On one hand, export controls continue to tighten, with Washington signaling further restrictions on advanced chip-making equipment and AI-related semiconductors. On the other, demand for memory and logic chips has softened in recent weeks, as global electronics orders slow and inventory builds up. The combination is proving toxic for Hong Kong-listed chip stocks.

What a casual observer might miss is the timing. This sell-off comes just as several mainland AI firms are preparing to announce new product updates and funding rounds. The market’s reaction suggests that investors are no longer willing to give these companies the benefit of the doubt. The narrative has shifted from “potential” to “proof.” Without clear signs of commercial traction, the valuation multiples that once seemed justified now look stretched. The memory sub-sector is particularly instructive.

Montage Technology, which specializes in DRAM interface chips, had been riding high on expectations of a memory cycle recovery. But recent earnings from global memory makers have been mixed, and the recovery in prices has not been as robust as hoped. Hong Kong investors, often quicker to cut losses than their mainland counterparts, are now questioning whether the cycle has any legs left. The broader Hang Seng index is now testing support levels that had held since early March.

If the AI and chip sectors continue to slide, the index could face further downside. The key variable is whether Beijing will step in with fresh stimulus or policy support for the tech sector. For now, the market is voting with its feet, and the direction is clearly south.