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HONG KONG — The Hang Seng Index plunged 426 points on Friday, closing at 25,962, as a wave of selling in technology shares underscored fading investor enthusiasm for artificial intelligence and heightened caution ahead of a pivotal U.S.–China summit.
The 1.62 percent drop marked one of the steepest single-day declines this quarter, erasing much of the index’s recent gains and signaling that Asia’s markets remain vulnerable to shifts in global sentiment despite Wall Street’s AI-fueled rally.
Tech Stocks Lead the Decline
The rout was led by Hong Kong’s heavyweight technology firms, which bore the brunt of investor skepticism.
Tencent Holdings slipped 0.83 percent, Xiaomi fell 2.7 percent, and Meituan dropped 3.1 percent.
Social media platform Kuaishou lost 2.8 percent, while toy retailer Pop Mart slid 3.1 percent.
The losses reflect a broader reassessment of AI-linked valuations. After months of exuberance, traders are questioning whether the sector’s growth narrative can sustain its lofty expectations.
“The AI trade is showing signs of fatigue,” said one Hong Kong–based strategist, noting that investors are rotating into defensive positions.
A Rare Bright Spot
Semiconductor Manufacturing International Corp (SMIC) bucked the trend, rising 2 percent.
Analysts attributed the gain to resilient demand for chips and Beijing’s continued push for technological self-sufficiency.
SMIC’s performance offered a rare counterpoint to the otherwise bleak session, highlighting the uneven impact of sentiment shifts across the tech sector.
Regional and Global Pressures
The sell-off was not confined to Hong Kong. The Shanghai Composite fell 1.02 percent, while the CSI 300 dropped 1.12 percent, underscoring the fragility of investor confidence across mainland China.
Global factors added to the unease. Rising oil prices, driven by escalating tensions in the Strait of Hormuz, stoked fears of inflationary pressures that could weigh on corporate margins and consumer demand.
Meanwhile, investors awaited the outcome of the Trump–Xi summit in Beijing, where trade and security issues are expected to dominate.
The uncertainty surrounding U.S.–China relations has kept risk appetite subdued, with traders reluctant to make bold bets ahead of concrete policy signals.
Despite Friday’s losses, the Hang Seng remains up 11.21 percent compared with May 2025.
Yet the index is still far below its all-time high of 33,484, reached in January 2018.
Analysts expect the benchmark to hover near 25,919 by the end of the quarter, with potential downside to 23,260 over the next 12 months if geopolitical risks intensify.
The fading AI rally suggests volatility ahead. “We’re entering a phase where fundamentals will matter more than hype,” said a regional economist. “Investors are recalibrating expectations, and that process can be painful.”
Market watchers warn that the combination of geopolitical uncertainty, inflationary pressures, and sector specific fatigue could keep volatility elevated.
For now, the Hang Seng’s trajectory appears tied to the delicate balance between global risk factors and domestic resilience.
Friday’s decline underscores the fragility of Asia’s markets in the face of shifting narratives.
As AI enthusiasm wanes and geopolitical risks loom large, Hong Kong’s Hang Seng Index may struggle to regain momentum.
The coming weeks particularly the outcome of the Trump Xi summit will likely determine whether the market stabilizes.
