Executive Summary: Key Takeaways
– The Hang Seng Tech Index (恒生科技指数) underperformed the broader Hang Seng Index in 2025’s AI-driven rally, rising only 23.5% versus 27.7%, highlighting a critical structural disconnect. – Heavy weightings in consumer internet platforms like Alibaba (阿里巴巴) and Tencent (腾讯控股), along with manufacturing giants such as BYD (比亚迪股份), dilute exposure to pure-play AI assets like compute power and hardware. – A-shares markets host key AI innovators including Cambricon (寒武纪) and Industrial Fulian (工业富联), which drove superior performance, exposing Hong Kong’s asset gap. – Index compilation rules favor mature, revenue-generating companies over emerging AI disruptors, causing a misalignment with the fast-evolving AI industry chain. – Investors must look beyond the Hang Seng Tech Index or await market reforms to directly capture China’s AI productivity narrative and avoid missing the AI wave.
The AI Bull Market Exposes a Curious Anomaly
In 2025, global equity markets surged on the back of artificial intelligence breakthroughs, but Hong Kong’s flagship tech benchmark told a different story. The Hang Seng Index (恒生指数) rallied 27.7% for the year, fueled by AI optimism, yet the Hang Seng Tech Index (恒生科技指数)—often hailed as the “Hong Kong Nasdaq”—gained only 23.5%, underperforming its broader counterpart. This discrepancy isn’t merely a statistical blip; it signals a profound structural flaw that leaves investors missing the AI wave. Across the border, A-shares markets painted a more vibrant picture: Cambricon (寒武纪) saw its stock price surpass that of Kweichow Moutai (贵州茅台), Industrial Fulian (工业富联) reached a market capitalization of 1.2 trillion yuan, and Zhongji Xuchuang (中际旭创) logged 2.5 trillion yuan in annual turnover, becoming the most actively traded A-share. These pure-play AI companies propelled A-share tech sectors to outperform their Hong Kong peers, underscoring where the real AI action resides. As capital floods into compute power, models, and infrastructure, the Hang Seng Tech Index’s composition remains anchored in an older tech era, risking irrelevance in the AI-driven valuation reset.
Data Highlights the Performance Gap
The numbers reveal a stark contrast. While the Hang Seng Index benefited from diverse sector gains, the Hang Seng Tech Index’s returns were dampened by its heavy reliance on consumer internet and manufacturing stocks. For instance, A-share AI compute subsectors averaged gains exceeding 30% in 2025, compared to the Hang Seng Tech Index’s 23.5%. This underperformance isn’t incidental; it stems from the index’s asset mix, which lacks exposure to the AI value chain’s most lucrative segments. Investors tracking the index are thus inadvertently sidelined from the AI boom, a trend that demands scrutiny.
A-Shares Forge Ahead with AI Leadership
A-shares markets have become the epicenter of China’s AI revolution, hosting companies critical to the compute and hardware layers. Firms like Haiguang Information (海光信息) in AI chips and XinYisheng (新易盛) in optical modules have seen valuations soar, driven by demand for AI infrastructure. This concentration contrasts sharply with Hong Kong, where such pure-play assets are scarce. The divergence highlights a broader market narrative: Hong Kong captures China’s internet and manufacturing present, while A-shares price its AI and tech-infrastructure future. For global investors, this means reevaluating where to allocate capital to harness the AI wave.
Dissecting the Hang Seng Tech Index: A Structural Imbalance
The Hang Seng Tech Index’s underperformance roots in its asset structure, which is skewed toward legacy tech sectors. Its top ten holdings—including SMIC (中芯国际), Alibaba (阿里巴巴), Meituan (美团), Tencent (腾讯控股), BYD (比亚迪股份), NetEase (网易), Xiaomi (小米集团), Kuaishou (快手), JD.com (京东集团), and Baidu (百度集团)—account for over 70% of the index weight. This list reveals a fundamental contradiction: consumer internet platforms dominate, creating a layer of separation from the AI value creation chain. While these giants have AI initiatives, such as Tencent’s Hunyuan (混元) or Alibaba’s Tongyi Qianwen (通义千问), their market valuations primarily hinge on traditional businesses like e-commerce commissions, gaming revenue, and food delivery orders. A Hong Kong-focused fund manager quipped privately: “To value Tencent’s AI, you must first move aside its tens of billions in annual gaming income to see the underlying model capabilities. But no valuation model can cleanly剥离 that.” This opacity means AI investments are often viewed as cost centers, especially as platforms engage in subsidy wars, worrying investors about profit erosion rather than rewarding innovation.
The Dominance of Consumer Internet Giants
Consumer internet platforms serve as the index’s anchor, but their AI contributions are overshadowed by core revenue streams. For example, when Alibaba and Tencent announce billions in AI subsidies—like Alibaba’s 3-billion-yuan “Spring Festival treat plan”—the market reaction focuses on short-term profit hits, not long-term AI potential. This dynamic makes stock prices迟钝 to AI advancements, unlike pure-play AI firms where every breakthrough directly boosts valuations. Consequently, the Hang Seng Tech Index misses the AI wave because its heaviest weights are mired in old-economy narratives, unable to fully capitalize on new productivity drivers.
The Dilution Effect of Manufacturing Weights
Inclusion of manufacturing companies like BYD, NIO (蔚来), Li Auto (理想), Haier (海尔), Midea (美的), and Sunny Optical (舜宇光学科技) broadens the index’s “tech” definition statistically but dilutes its AI concentration. These firms’ valuations revolve around capacity, sales volume, and gross margins—not compute power, algorithms, or models central to the AI产业链. Their presence transforms the Hang Seng Tech Index into a hybrid of “new economy manufacturing plus internet applications,” rather than a pure AI productivity index. This structural issue creates a mismatch: the index patches together old and new assets, from internet traffic stories to auto manufacturing tales, with only零星 semiconductor plays like SMIC and Hua Hong (华虹) offering limited AI exposure. From an产业链 position, the index leans toward AI’s application端, absent from the value源头 of compute and core technology.
Why the Index Misses AI Core Assets: Systemic Misalignments
The Hang Seng Tech Index’s失焦 on China’s AI core assets stems from systemic错配 between its rules and industry evolution. Fundamentally, it operates as a “post-hoc index” rather than a “forward-looking index.” Its inclusion criteria—based on historical data like market capitalization, liquidity, and financial metrics—naturally favor mature, scaled companies over emerging AI innovators at the技术突破 frontier. This leads to a value anchor stuck in the 2010s “China new economy” paradigm, where Hong Kong has become a hub for消费互联网 and hardware manufacturing revaluation. In contrast, A-shares and primary markets host the future of Chinese科创 and new infrastructure, with AI产业链 beta densely concentrated there. Even when Hong Kong lists relevant firms, their impact on the index’s “含AI量” is limited. Take SMIC, the index’s highest-weight stock: its performance ties closely to consumer electronics cycles, not pure AI compute trends. Meanwhile, from AI chip design to servers and optical modules, the purest AI plays cluster in A-shares, creating a self-reinforcing value lift. This isn’t just a Hang Seng Tech Index problem; it reflects Hong Kong’s broader asset structure. In the大模型 arena, key players like Moon’s Dark Side (月之暗面), Baichuan AI (百川智能), Stepfun (阶跃星辰), and 01.AI (零一万物) remain unlisted, relying on private funding that often surpasses IPO utility. As Wang Xiaochuan (王小川) noted, publicly listed peers like Zhipu AI (智谱AI) and MiniMax benefit from technical红利 and state support, but “market capitalization and commercialization能力 don’t match.” With AI主力 players absent, even thematic indices like the Hang Seng人工智能主题指数 lack purity, leaving Hong Kong without a true barometer of “China AI productivity.”
The “Post-Hoc” Index Problem
Index编制 rules prioritize past success over future potential, capturing companies after they’ve achieved scale but missing disruptive newcomers. For instance, the Hang Seng Tech Index includes firms like Xiaomi and JD.com based on their historical revenue and market cap, not their AI R&D pipelines. This backward-looking approach contrasts with dynamic AI sectors where innovation precedes profitability. Until reforms adjust criteria to weight emerging tech更 heavily, the index will continue trailing the AI wave, forcing investors to seek alternatives for direct exposure.
Hong Kong vs. A-Shares: Divergent Asset Pools
Hong Kong’s market structure吸引s manufacturing and internet IPOs, while A-shares attract hard-tech and infrastructure firms due to regulatory and investor preferences. For example, the STAR Market (科创板) in Shanghai lists AI芯片 and biotech startups, offering growth potential absent in Hong Kong. This divergence means that for investors targeting AI compute or hardware, A-shares are essential, as highlighted by the outperformance of stocks like Zhongji Xuchuang. The Hang Seng Tech Index, therefore, represents a subset of China’s tech landscape, one that’s increasingly peripheral to the AI revolution.
The Global Shift to AI Productivity Narrative
In early 2026, earnings season underscored a global pivot: tech giants emphasizing AI applications faced valuation pressures, while those focused on compute and models thrived. After Amazon, Google, Microsoft, and Meta announced capital expenditure plans worth hundreds of billions, and Tencent, Alibaba, and Baidu rolled out billion-yuan subsidy campaigns, investors voted with capital—punishing application-layer spenders and rewarding core AI enablers. This volatility springs from a new pricing logic: capital is shifting from “application叙事” to “生产力叙事,” forming a clear chain from “compute infrastructure—large models and algorithms—industry applications.” Here, assets closer to底层算力 and core tech become revaluation源头. However, the Hang Seng Tech Index’s weight distribution错位 with this chain: strong in applications but weak in core compute and frontier models. Thus, when Jensen Huang (黄仁勋) predicts a hundredfold growth in global AI compute demand, Hong Kong stocks show muted responses compared to A-shares rallies in GPU and power sectors. More dramatically, as China’s AI industry makes strides in video generation and multimodal understanding—like ByteDance’s (字节跳动) Seedance 2.0 model—Hang Seng Tech Index investors suffer. Seedance 2.0’s advance threatens content production costs, overshadowing subsidies from Tencent Yuanbao (腾讯元宝) or Alibaba Qianwen, and pressures competitors like Kuaishou’s Kling (快手可灵). With six of the index’s top ten holdings competing directly or indirectly with ByteDance, technological breakthroughs become headwinds, not tailwinds. This underscores why the index needs more “源头活水” to anchor an “AI China” narrative.
Capital’s New Pricing Chain
The AI value chain now dictates valuations: compute providers like NVIDIA command premium multiples, followed by model developers, and finally appliers. This hierarchy leaves the Hang Seng Tech Index exposed, as its weights are concentrated in the application tier. For example, while AI video generation boosts A-share compute and marketing stocks, it squeezes Hong Kong internet platforms reliant on traditional content monetization. Investors must recognize this shift and adjust portfolios to include assets across the chain, not just at the application end where the index is overweight.
Hang Seng Tech’s Application-Skewed Profile
The index’s reliance on apps means it benefits less from AI infrastructure growth. When breakthroughs occur, as with Seedance 2.0, A-shares see immediate gains in算力 and hardware, while Hong Kong stocks grapple with competitive threats. This skew limits the index’s ability to capture the AI wave’s full potential, making it a suboptimal tool for betting on China’s AI productivity surge.
Reanchoring Hong Kong’s AI Story: Paths to Reform
Hope emerges from new listings: Zhipu AI and MiniMax debuted on the Hong Kong Exchange in January 2026, and domestic GPU firms like Biren Technology (壁仞科技) and Tianshu Zhixin (天数智芯) have gone public. These companies fill gaps in AI基座标的, becoming essential for global capital allocating to Chinese AI. However, as newcomers, they need time to build market cap before qualifying for index inclusion. In the interim, investors must view the Hang Seng Tech Index as a “last-generation tech asset组合,” not a direct tool for China’s AI industry beta. To truly配置 compute infrastructure and core hardware, look to A-shares算力 chains or actively筛选 Hong Kong’s emerging AI plays. Long-term, reshaping the index’s relevance requires more than passive等待; Hong Kong must enhance liquidity, valuation frameworks, and产业集聚 to attract AI core assets. This is crucial for the index to capture AI产业化机遇 and for Hong Kong to maintain its international financial center status. The reform clock is ticking, and with AI浪潮 accelerating, delayed action could mean permanently missing the wave.
New Listings and Emerging Players
Recent IPOs like Zhipu AI and MiniMax mark a step forward, but their index impact will take quarters to materialize. Investors should monitor these firms for growth trajectories and potential inclusion. Additionally, keep an eye on private AI unicorns that may list in Hong Kong, as their arrival could rebalance the index toward pure AI themes. For now, though, the Hang Seng Tech Index remains a laggard in the AI race, necessitating active management for those seeking exposure.
Strategic Implications for Investors
To avoid missing the AI wave, consider these steps: first, diversify into A-shares via channels like Stock Connect (沪深港通) to access pure-play AI stocks; second, use thematic ETFs focused on AI compute or hardware, rather than relying solely on the Hang Seng Tech Index; third, engage with Hong Kong regulators and index providers to advocate for rule changes that weight emerging tech more heavily. As the AI revolution unfolds, passive indexing may lead to underperformance, so active selection and cross-market allocation are key.
Synthesizing Insights for Forward-Looking Strategies
The Hang Seng Tech Index’s underperformance in the AI era is a structural inevitability, not a temporary blip. Its composition, rooted in consumer internet and manufacturing, misaligns with the AI productivity narrative, causing investors to miss the wave. As A-shares surge with AI innovators and global capital reprices tech based on compute and models, Hong Kong must accelerate reforms to stay relevant. For sophisticated investors, the takeaway is clear: look beyond the index, embrace cross-border opportunities, and pressure for market evolution. The AI wave is here, and capturing it requires navigating beyond traditional benchmarks to the heart of China’s tech transformation. Act now to recalibrate portfolios and engage with market stakeholders—your stake in the future depends on it.