Quick overview

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Hong Kong-listed Chinese technology stocks surged to their highest level in nearly four years, driven by demand fueled by optimism about artificial intelligence. According to data compiled by Bloomberg, the Hang Seng Tech Index increased by up to 3.5 percent on Wednesday, reaching its highest level since November 2021.

Baidu led the gains with a 16 percent increase, while other tech giants also saw rises during morning trading. Companies like JD.com, Meituan, and Alibaba Group Holding Ltd. experienced gains as well.

The index is now on track for its seventh consecutive week of increases, supported by a reduction in tensions between the U.S. and China, as well as optimism that significant investments by tech companies in artificial intelligence will prove profitable.

The price-to-earnings ratio, a crucial metric for investors, remains significantly lower for Chinese tech stocks compared to their US counterparts. Bloomberg-compiled data shows that the Hang Seng Tech Index is trading at 20.5 times forward earnings, which is less than the Nasdaq 100 Index’s ratio of 27 times earnings.

China’s largest tech companies are also on a massive spending spree in AI as they compete with US companies and one another to dominate a market widely predicted to transform how people live and work.

Total investment from well-known Chinese internet companies, including Tencent Holdings Ltd. and Alibaba. According to a report by Bloomberg Intelligence, Baidu and JD. com is expected to reach $32 billion in 2025, more than doubling from $13 billion this year. This has contributed to a funding frenzy in the bond and equity markets.

Alibaba raised $3 billion last week through a successful convertible bond offering, while Tencent sold its first bond in four years on Tuesday for 9 billion yuan ($1.27 billion) through the dim sum bond market. According to a state television report on Tuesday night, China Unicom’s Sanjiangyuan data center has signed contracts to use AI chips from Chinese companies, including Alibaba’s chip division T-Head. This is the most recent news that has fueled optimism.