HK stocks at near three-week low as Alibaba floats AI bubble concerns

Hong Kong stocks dropped to a nearly three-week low on Tuesday amid sluggish market sentiment following Alibaba’s (9988) bubble warning in AI data center buildout, alongside Xiaomi’s (1810) upsized placement.

The benchmark Hang Seng Index closed at 23,344 points, down 561 points or 2.35 percent, with a main board turnover of HK$285.3 billion.

The indicator once dropped 583 points, hitting a low of 23,321.

The Hang Seng Tech Index slid 3.82 percent, or 219 points, to 5,517.

Xiaomi said it had raised US$5.5 billion (HK$42.9 billion) in an upsized share sale as the company pushes forward with its ambitious electric vehicle manufacturing plans.

The company sold 800 million shares at HK$53.25 each, it said in a statement to the Hong Kong Stock Exchange. Its share once dropped to HK$53.25, the same as its share sales price, before closing 6.32 percent lower at HK$53.40 apiece.

Meanwhile, at a summit hosted by HSBC (0005), Alibaba chairman Joseph Tsai Chung-Hsin expressed concern about some hefty investment announcements in artificial intelligence in the United States, saying it could be the start of a bubble.

"People are talking about US$500 billion, several hundred billion dollars. I don't think that's entirely necessary. I think in a way, people are investing ahead of the demand that they're seeing today."

He said he thought it was worrying when people began to talk about building data centers on spec, adding that he was seeing "the beginning of some kind of bubble."

Alibaba slid 3.84 percent and Tencent (0700) lost 2.14 percent. Electric vehicle giant BYD (1211) declined by 3.52 percent.

In mainland China, the Shanghai Composite Index closed flat at 3,369. The Shenzhen Component Index lost 46 points, closing at 10,649.

STAFF REPORTER and REUTERS