Chinese stocks tumble as global tech selloff deepens

Hong Kong and Mainland China's stock markets experienced a sharp decline on Friday due to a tech selloff driven by the Nasdaq. The benchmark Hang Seng Index in Hong Kong dropped 1%, while the Hang Seng Artificial Intelligence Index fell 4%. The Shanghai Composite Index also declined by 1.1%, staying on track to end a 12-week losing streak.

The initial impact of the tech selloff was more severe in tech-heavy indices, with the Star 50 Index and the AI Index sliding as much as 5% before recovering some losses. In Hong Kong, the Hang Seng Index decreased by 1%, and the Hang Seng Artificial Intelligence Index dropped by 4%. Overnight, the Nasdaq suffered its steepest one-day drop since April 2025, causing trillions of dollars in market value losses as concerns grew about potential stricter AI regulation following a Democratic victory in the US midterm elections.

Dong Baozhen, chairman of asset manager Lingtong Shengtai, suggested that the overnight slump in US tech stocks had undermined the logic behind the AI-driven rally. He questioned whether AI bull markets in other regions could sustain themselves without the US market. Chinese AI hardware stocks with significant exposure to the US market faced the hardest hit, with Zhongji Innolight and Eoptolink Technology experiencing significant losses.

AI software companies also faced pressure, with Zhipu sinking up to 15.4% amid worries about a broader AI backlash potentially affecting the timing of Anthropic's IPO. Jason Hsu, founder and chairman of Rayliant Global Advisors, noted that China's sentiment-driven stock market is heavily influenced by US AI stock performance. Technology stocks play a crucial role in China's stock market, and any signs of a bubble burst in the US would undoubtedly affect the Chinese market.

Despite the panic selling, bargain hunters managed to trim losses in a market expected to see weekly gains. While China may not completely escape the fallout from Wall Street, especially with the aggressive selling, some experts cautioned against treating China's entire AI supply chain as a single trade. Growth in AI chip players like Huawei and Cambricon is primarily driven by China's drive for technological self-reliance. When investors rush to cut risk, even solid companies may be sold.