Beginning of October, the HK tech sector showed strong performance, becoming the focus of market attention. Driven by the recovery in the global technology industry and the AI wave, HK tech stocks are entering a new round of upward movement. Data shows that the Hang Seng Tech Index has risen more than 5% since October, outperforming the broad market index. AI and semiconductor sectors performed particularly well, with continuous inflow of institutional funds injecting strong momentum into the market.
Technology Sector Shows Strong Performance, AI and Semiconductors Lead the Market
Entering October, the HK tech sector shows a steady upward trend. The Hang Seng Tech Index has risen 5.2% since the first trading day in October, significantly outperforming the Hang Seng Index's 2.8% gain during the same period. Within the sector, stocks related to artificial intelligence and semiconductors performed particularly well, becoming the core force driving index gains.
In the AI sector, several large technology companies saw new highs recently. Enterprises focused on AI chip R&D saw gains over 15% since October, reflecting high market recognition of their leading position in AI computing power. Simultaneously, AI application companies are also active, with application companies in areas like fintech and smart healthcare attracting capital.
The semiconductor sector also performed strongly. With the cyclical recovery in the global semiconductor industry, HK semiconductor-related companies are seeing valuation repair. Data shows that the HK semiconductor sector rose 7.3% since October, with fine areas like chip design and wafer manufacturing performing prominently. Several broker reports point out that as emerging applications like 5G, IoT, and AI continue to expand, semiconductor industry demand will remain stable, and HK semiconductor companies are expected to benefit from this industry cycle recovery.
Institutional Capital Continues to Increase, Focusing on Southbound Deployment
Capital flow data shows continuous inflow of funds into the HK tech sector since October. Regarding northbound funds, foreign investors continue to increase holdings in HK tech stocks through the SinoHong Kong Stock Connect, with a cumulative net purchase exceeding HKD 8 billion over the last five trading days. Southbound funds are also actively deploying, with net purchases of tech stocks reaching a new high for the year, totaling HKD 6.5 billion, indicating growing confidence among mainland investors in HK tech stocks.
Institutional investors' optimism towards HK tech stocks is based on several points: First, the valuation of HK tech stocks is still relatively low compared to other global markets, offering a higher margin of safety. Second, Chinese technology companies are continuously improving their global competitiveness in areas like AI and semiconductors, with huge future development potential. Third, policy support for technological innovation provides a favorable policy environment for industry development.
It is noteworthy that several international investment institutions recently released research reports upgrading the rating for HK tech stocks and recommending increased allocation. Goldman Sachs expressed optimism for the long-term investment value of the HK tech sector, especially leading companies in AI and semiconductors. Morgan Stanley pointed out that the current valuation of HK tech stocks is at a historic low, with over 20% potential upside in the next year with industry recovery and performance improvement.
Booming AI Industry Benefits HK Leaders Clearly
The AI industry, as the forefront of global technological development, is ushering in unprecedented development opportunities. With the popularization of large language models like ChatGPT, AI application scenarios are expanding from natural language processing to computer vision, from autonomous driving to smart healthcare, profoundly changing various industries.
AI-related companies in the Hong Kong market are mainly distributed in three areas: AI chip design, AI algorithm R&D, and AI application services. AI chip design companies are favored by capital due to their advantage in computing power. Several AI chip companies have set new highs in stock prices since October, generating high expectations for future earnings growth.
AI algorithm R&D companies are also active, with companies having leading advantages in sub-fields like computer vision and natural language processing gaining institutional favor. These companies possess core technological barriers and occupy important positions in the AI industry ecosystem, with huge future potential.
AI application service companies benefit from the commercialization of AI technology, deepening applications in areas like fintech, smart cities, and smart healthcare. As AI technology matures, these companies are expected to see periods of earnings explosion, bringing substantial returns to investors.
Semiconductor Industry Cyclical Recovery, HK Companies See Valuation Repair
The semiconductor industry, as the foundation of the information industry, directly influences the trend of the entire technology industry. After more than a year of adjustment, the global semiconductor industry is entering a cyclical recovery in 2026, demand is warming up, and supply is being optimized, significantly improving industry sentiment.
HK semiconductor companies mainly include leading enterprises in chip design, wafer manufacturing, and testing. These companies possess strong competitiveness in their respective fields, with some holding a leading position in niche markets. With the industry recovery, these companies' performance is expected to improve, and valuations will gradually repair.
In chip design, demand for high-performance chips continues to grow with the promotion of emerging applications like 5G, IoT, and AI. HK chip design companies with technological advantages in specific areas are expected to seize this opportunity for rapid performance growth.
Wafer manufacturing companies benefit from the trend of global semiconductor capacity shifting to Asia, as well as the rapid development of the domestic semiconductor industry. With continued policy promotion in the domestic semiconductor industry, wafer manufacturing companies will see development opportunities, and capacity utilization rates are expected to improve.
Testing companies are also benefiting from the industry recovery.With breakthroughs in advanced packaging technology, the value of testing companies in the semiconductor industry is continuously increasing, with broad future prospects.
Industry Outlook: Long-Term Investment Value is Prominent in the Tech Sector
Looking ahead, the HK tech sector has prominent long-term investment value. First, from a valuation perspective, HK tech stocks are at historic lows after previous adjustments, offering a high margin of safety. Compared to international markets, HK tech stocks still have room for valuation discounts, providing a good entry point for investors.
Second, from an industry development perspective, Chinese technology companies are continuously enhancing their position in the global technology industry, especially in areas like AI, semiconductors, and new energy. Chinese enterprises possess strong competitiveness, and with continuous improvement in technological innovation capabilities, Chinese tech companies are expected to play increasingly important roles in the global technology industry.
Third, from the policy environment perspective, the Chinese government continues to increase support for technological innovation, introducing a series of policies that provide a favorable policy environment for the tech industry. These policies will effectively promote the development of the tech industry and enhance the core competitiveness of technology enterprises.
Finally, from the capital flow perspective, as China's capital market opens up further, international capital's attention on the HK market is increasing. Especially in the tech sector, as a major component of the HK market, it will attract more international capital inflow, providing ample liquidity support to the market.
Investment Advice: Focus on AI and Semiconductor Leaders, Seize Structural Opportunities
Based on the above analysis, we propose the following investment recommendations for HK tech stocks:
- Focus on leading companies in the AI and semiconductor sectors, as these companies possess strong technological barriers and market competitive advantages, and are likely to occupy leading positions in industry development.
- Focus on technology companies with core technologies, as these companies possess strong competitiveness in niche areas and have huge future development potential.
- Focus on tech stocks with reasonable valuations, avoid blind chasing of high prices, and focus on long-term investment value.
- Focus on policy-benefiting sectors, such as AI and semiconductors, where policy support is significant, and related companies are likely to gain policy dividends.
- Focus on the direction of southbound capital flow, as continuous inflow of southbound funds will provide strong support to the market.
Overall, the performance of HK tech stocks since October shows strong recovery momentum in the market, with the prominent performance of the AI and semiconductor sectors becoming the market focus. With continued improvement in industry sentiment and improvement in capital flows, HK tech stocks are expected to enter a new round of upward movement. Investors should focus on tech leaders with core competitiveness, seize structural investment opportunities, while paying attention to risk control and proper asset allocation.
Risk Warning: The tech sector has high volatility. Investors should closely monitor changes in industry policies, technological iteration risks, and changes in the international market environment to control risks.
