Chinese equities traded lower by midday on Wednesday as selling pressure in artificial intelligence-linked stocks intensified for a second straight session, while Hong Kong shares outperformed on strong gains in internet platform companies, according to Reuters.
The weakness in mainland markets reflected growing investor concerns over whether heavy spending on AI-related businesses will generate adequate returns. As a result, market participants shifted funds away from technology hardware stocks and into more traditional sectors such as real estate and consumer staples.
China's blue-chip CSI300 Index fell 0.2% by the lunch break, while the Shanghai Composite Index declined 0.5%. In contrast, Hong Kong's benchmark Hang Seng Index rose 1.4%, supported by gains in largecap technology companies.
Semiconductor stocks lead the decline
Chipmakers were among the biggest losers during the session as semiconductor shares faced intense selling pressure. Reuters reported that the CSI All Share Semiconductor Index plunged 5.7%, while the technology-focused STAR50 Index dropped 4.2%. The 5G Communication Index also fell 3.4%.
The broader weakness in semiconductor stocks came after South Korea's chip-heavy KOSPI Index suffered a sharp decline following earnings from memory chip giant SK Hynix that failed to meet elevated investor expectations despite posting strong quarterly results, according to Reuters.
However, China's leading memory chipmaker CXMT bucked the broader trend, with its shares rising 3.7%.
Investors rotate into traditional sectors
While AI and semiconductor stocks remained under pressure, investors shifted toward sectors that have underperformed technology shares this year.
China's real estate sector advanced 3.2%, while consumer staples stocks gained 1.8%, reflecting a rotation into more defensive and value-oriented segments of the market.
The move suggests investors are reassessing the near-term outlook for AI-related companies after months of strong gains driven by optimism surrounding artificial intelligence.
Hong Kong tech shares outperform
Hong Kong-listed internet platform companies emerged as bright spots in the region, helping the Hang Seng Index outperform mainland markets.
The Hang Seng Tech Index extended its monthly gain to around 10% as investors rotated out of AI hardware names and into internet platforms, according to Reuters.
Among the major gainers, Tencent climbed 4%, while Alibaba added 1.7%, providing significant support to the Hong Kong benchmark.
Fresh U.S. restrictions add to pressure
Investor sentiment was also weighed down by new trade measures announced by the United States.
According to Reuters, the U.S. administration unveiled fresh restrictions targeting imports of new Chinese robots and power inverters. The measures are aimed at safeguarding the U.S. artificial intelligence ecosystem from national security risks while encouraging domestic production in industries expected to see rapid growth.
The latest restrictions added another layer of uncertainty for Chinese technology companies already facing concerns over AI investment returns and heightened geopolitical tensions.
