The Resurgence of Chinese Tech: How AI Is Rewriting the Rules of the Hong Kong Stock Market

The Hong Kong stock market is undergoing a transformation driven by artificial intelligence (AI) innovation and a surge in government-backed policy support. As Chinese tech firms pivot toward AI-driven growth, Hong Kong has emerged as a critical hub for capital raising and strategic positioning. This shift is not merely a reflection of technological optimism but a calculated response to geopolitical dynamics, regulatory tailwinds, and the urgent need for domestic semiconductor and algorithmic self-sufficiency.

Policy Tailwinds: A Blueprint for AI Supremacy

China's AI ambitions are underpinned by a multi-pronged policy framework. The government's $8.4 billion AI investment fund, announced in 2025, targets startups and infrastructure development, with a clear goal of achieving 70% AI application penetration in key industries by 2027 and 90% by 2030. Hong Kong has mirrored this momentum, allocating HK$1 billion to establish the Hong Kong AI Research and Development Institute and launching a HK$3 billion Frontier Technology Research Support Scheme to attract global AI talent. These initiatives are complemented by the AI Supercomputing Centre at Cyberport, set to operationalize by year-end 2025, providing critical computational resources for AI development.

The impact on the Hong Kong stock market has been profound. The Hang Seng Index surged 15.4% in local currency terms in 2025, fueled by investor enthusiasm for AI breakthroughs like DeepSeek's low-cost models and the broader policy narrative of technological decoupling from the West. Meanwhile, the city's IPO market raised HK$72 billion by May 2025-the highest since 2021-as Chinese firms increasingly opt for Hong Kong listings to navigate U.S. regulatory scrutiny and export controls.

AI-Driven Growth: The Rise of Hong Kong-Listed Tech Titans

At the forefront of this resurgence are companies like Zhipu AI and Shanghai Iluvatar CoreX Semiconductor, both preparing for high-profile Hong Kong listings in early 2026. Zhipu AI, a leader in large language models (LLMs), is set to raise HK$4.35 billion (US$560 million) through its IPO, targeting a post-listing valuation of HK$51.16 billion. Despite reporting a 1H 2025 adjusted net loss of 1.75 billion yuan-nearly nine times its revenue-the company's focus on enterprise solutions, which account for 85% of its sales, underscores its strategic alignment with industrial AI adoption.

Shanghai Iluvatar CoreX, a general-purpose GPU developer, is also raising HK$3.67 billion to accelerate commercialization of its chips, a critical need as U.S. export restrictions strain China's semiconductor sector. Both firms exemplify the broader trend of AI and tech startups leveraging Hong Kong's capital markets to fund R&D and scale operations. By December 2025, at least 25 AI-related companies had debuted in Hong Kong, with another 10 slated for January 2026.

Strategic Infrastructure and Market Dynamics

Hong Kong Exchanges & Clearing (HKEX) is amplifying this momentum through its AI-centric strategy. The exchange aims to dominate Asian capital markets by leveraging its exclusive connectivity to Mainland China and a proprietary data moat, positioning itself as the "Marketplace of the Future." HKEX's focus on AI-driven analytics and intelligent capital flow management aligns with the city's broader vision of becoming a global AI innovation hub.

Regulatory reforms further bolster investor confidence. The Hong Kong Monetary Authority has encouraged AI adoption in financial services, particularly for monitoring money laundering and terrorist financing risks. Simultaneously, digital tools introduced by the government are streamlining business operations, reducing processing times, and fostering AI integration in public services.

Risks and Realities: Navigating a Volatile Landscape

Despite the optimism, challenges persist. The AI sector remains unprofitable for most firms, with Zhipu AI's 2.36 billion yuan net loss in 1H 2025 highlighting the high R&D costs inherent to cutting-edge innovation. Geopolitical tensions, including U.S. tariffs and export controls, continue to create uncertainty, while legal risks-such as MiniMax's $75 million copyright lawsuit-add layers of complexity.

Moreover, China's broader economic headwinds, including weak consumer confidence and a struggling property market, could indirectly affect AI firms' post-IPO performance. However, the government's sustained policy support and the strategic imperative to reduce reliance on foreign technology suggest that these risks are being actively mitigated.

Conclusion: A High-Conviction Opportunity

The confluence of AI innovation, policy tailwinds, and Hong Kong's strategic positioning creates a compelling case for high-conviction equity exposure. While risks are undeniable, the scale of government investment, the urgency of technological self-reliance, and the resilience of Hong Kong's capital markets position the region as a pivotal arena for the next phase of China's tech evolution. For investors, the key lies in balancing long-term growth potential with careful scrutiny of individual company fundamentals and macroeconomic dynamics.