AI and Semiconductor Stocks Defy the Trend

The financial landscape in Hong Kong witnessed a bustling start on February 3rd, coinciding with the arrival of the Year of the Snake in the Chinese zodiacAs the trading day commenced, investors were grappling with the repercussions of a recent announcement from President Biden, who imposed a 10% tariff on imports from China just two days priorThis economic move is forecasted to stir uncertainties in the market, leading to an approximate decline of 1% in the Hang Seng Index.

However, a closer examination of the market reveals intriguing counter-trends, particularly with certain sectors such as artificial intelligence (AI) and semiconductor stocksWhile the broader market retracted, the Hang Seng Tech Index demonstrated resilience, initially trending downward by about 1% but then making a comeback to close slightly positive, appreciating by 0.06%.

Among the notable movers was Kingsoft Cloud, which experienced a staggering rise of over 30% at one point during the trading sessionSimilarly, other tech heavyweights like Fourth Paradigm and Alibaba also marked impressive gains, with increases of nearly 10% and over 5% respectivelyOn the semiconductor front, SMIC of China saw its shares soar by more than 10%, while ZTE Corporation enjoyed a 3% uptick, highlighting the diverse performance of stocks amidst macroeconomic pressures.

Kingsoft Cloud stands out as a significant player in the cloud computing service industry, catering to various verticals including finance, healthcare, public services, and state-owned enterprisesAccording to research conducted by Haitong International, the company is projected to continue providing cloud services for notable partners such as Kingsoft Software Group and Xiaomi during the 2025-2027 period.

Competing closely, both Alibaba and Fourth Paradigm are making substantial advancements in the realm of AI, notably through the introduction of their latest AI model productsAlibaba has developed the Tongyi Qianwen large model, and intriguingly, during the Lunar New Year festivities, the updated version Qwen2.5-Max was launched

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This iteration has performed exceptionally well across various evaluations, showcasing its aptitude in areas such as university-level assessments and programming capabilitiesMeanwhile, Fourth Paradigm's industry-grade base model is tailored for critical sectors including transportation, energy, and finance, facilitating personalized industry-specific applications.

On the hardware side, ZTE is leading the charge with its self-developed AI chipsReports from Everbright Securities indicate that ZTE Microelectronics, a wholly-owned subsidiary, is devoted to chip design, focusing on products spanning the Information and Communication Technology (ICT) sector with a leadership position domestically in terms of research and development capabilitiesAs the largest semiconductor foundry in China, SMIC is well-equipped to manufacture chips for AI applications and boasts a competitive edge in various process nodes within the country.

Nevertheless, caution is warranted as some AI and semiconductor stocks listed on the Hong Kong Stock Exchange have not been immune to the broad market trendsFor instance, Baidu saw its shares drop over 5%, while Hua Hong Semiconductor's stock fell by more than 1%. Similarly, Taiwan Semiconductor Manufacturing Company (TSMC) recorded a decline of over 5% on the Taiwan Stock Exchange, indicating that the ripple effects of global economic conditions are felt across the region.

In the ever-evolving tech landscape, domestic AI model innovations have captured the global stage, notably with DeepSeek, which gained prominence during the Lunar New Year due to its cost-effectiveness, high performance, and open-source natureBloomberg reports that this AI model's associated application has soared to the top of the download charts in 140 countries, illustrating its widespread acceptance.

Furthermore, both Tencent Cloud and Huawei Cloud have announced the rollout of services based on their cloud computing platforms corresponding to DeepSeek-R1. According to Huawei Cloud, the operations rely on their self-developed Ascend AI inference acceleration card, delivering performance that rivals global high-end GPU deployment models.

The emergence of DeepSeek underscores China's potential in tech innovation, potentially providing a boon for domestic companies within the AI supply chain