Global Market: China stocks slide as global AI selloff hits chipmakers; Alibaba rallies on new AI model

Chinese equities traded lower in early trade on Monday as a global selloff in artificial intelligence (AI)-linked stocks weighed heavily on semiconductor companies. Meanwhile, Hong Kong-listed technology firms outperformed after Alibaba unveiled its latest AI model, according to Reuters.

The benchmark CSI300 Index declined 0.7% by the midday break, while the Shanghai Composite Index slipped 0.6%. In Hong Kong, the Hang Seng Index was largely unchanged as gains in major internet stocks helped offset weakness in the broader market.

Global AI correction weighs on semiconductor stocks

Investor sentiment towards AI-related stocks remained under pressure following a broad global correction in the sector. The decline has prompted investors to reassess valuations across semiconductor companies, including those in China.


The technology-focused STAR50 Index dropped 3.7%, while the CSI All Share Semiconductor Index tumbled 5.2%, making chipmakers the worst-performing segment of the market.

Despite the sector-wide weakness, shares of newly listed memory chipmaker CXMT advanced 2.7%. Reuters reported that investors viewed the company's valuation as relatively reasonable compared with smaller peers in the semiconductor space.

Analysts see better long-term opportunity

Market volatility has led investors to rebalance their portfolios after a sharp correction in AI-related stocks.

Analysts at China International Capital Corporation (CICC) believe the recent pullback could improve the medium- to long-term investment case for AI, provided the broader AI industry remains on its growth trajectory. They also noted that portfolio rebalancing is a natural response following the recent turbulence, even as AI continues to be viewed as a key long-term investment theme.

Alibaba surges after launching new AI model

Alibaba emerged as one of the biggest gainers in Hong Kong, with its shares jumping nearly 7% after unveiling Qwen3.8-Max, which the company described as its largest and most capable artificial intelligence model to date.

The rally lifted sentiment across Hong Kong's technology sector, with major internet companies collectively gaining nearly 1%, helping the Hang Seng Index outperform mainland markets.

Manufacturing data adds to cautious mood

Investor caution was also influenced by fresh economic data showing China's manufacturing sector expanded at its slowest pace in four months during July.

According to Reuters, the latest private-sector survey indicated that while factory output and new orders continued to grow, the pace of expansion moderated. Export orders returned to growth after contracting in the previous month, offering some support but failing to offset broader concerns over slowing momentum.

Market outlook

The combination of a global AI-led equity correction and signs of moderating manufacturing activity has kept investors cautious toward Chinese equities. However, strength in Hong Kong's internet giants, particularly Alibaba following its latest AI announcement, suggests investors continue to differentiate between companies with strong AI growth prospects and those facing valuation pressures in the semiconductor segment.