Chinese technology stocks slumped after President Donald Trump moved to further squeeze US investments into the Asian nation, in a sign of deepening financial and technological decoupling between the world’s two largest economies.
The Hang Seng Tech Index fell as much as 4.4% on Tuesday, the most since November. Alibaba Group Holding Ltd. plunged 7.9% in Hong Kong, following a 10% slide in its American depositary receipts. The retreat comes after a 5.2% drop overnight in the the Nasdaq Golden Dragon China Index.
The losses threaten to unravel a world-beating rally in Chinese tech stocks this year, driven by optimism over DeepSeek. Having largely downplayed Trump’s initial tariffs salvo, investors are forced to recalculate geopolitical risks.
Over the weekend, Trump called for fresh scrutiny on foreign companies listed in the US and their ownership structures, while also ramping up pressure on US pension and endowment funds’ investment in Chinese high-tech sectors.
“Given the significant outperformance in AI-related Chinese stocks year to date, the uncertainties introduced by Trump could lead to some profit taking,” said Charu Chanana, chief investment strategist for Saxo Markets. “If these orders were to go into effect, there is a risk that AI supply chains could be impacted.”
Chinese internet megacaps have been on a tear this year, winning back investor favor after DeepSeek gave them confidence on the industry’s growth potential. The renewed selloff, however, serves as a reminder on how quickly sentiment can turn following a sharp valuation re-rating of the cohort.
Despite the retreat, the Hang Seng Tech Index remains up about 25% for the year. Wall Street analysts have been saying the once-shunned sector is at a turning point, especially in the wake of President Xi Jinping’s high-profile meeting with Chinese tech business leaders. An extended slide in tech shares may undermine the budding optimism.
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