The regular periodic adjustment for Stock Connect targets on both the Shanghai and Shenzhen exchanges took effect on September 7th. Concurrently, recent in-depth analyses released by international institutions indicate that a significant reshaping of profit distribution is underway within the global AI industry, with value migrating progressively from the hardware segment toward cloud service providers. Within this framework, could the Hong Kong-listed technology sector, which houses several of China's leading cloud platforms, be approaching a more favourable period for investor attention?
Multiple forces are converging to potentially drive a revaluation of Hong Kong's AI-related assets, spanning industrial logic, capital flows, and policy tailwinds.
As the profit centre of the AI value chain shifts, Hong Kong cloud platforms may be poised for a significant re-rating. A research report released on August 28th by an overseas institution, which examined the unit economics of the AI industry, revealed that AI model companies direct approximately $35 to $40 of every $100 in revenue to leading cloud providers as "inference computing fees." This suggests that at the current stage of AI commercialisation, cloud vendors, acting as the foundational providers of computing infrastructure, not only capture a substantial share of industry revenue but also enjoy a more predictable and stable profitability model. Furthermore, second-quarter earnings reports show that the combined cloud revenue of the four major North American cloud providers reached $116.2 billion, a 43% year-on-year increase, with total backlog orders hitting $2.33 trillion, up 188% year-on-year, indicating strong long-term revenue visibility.
In this climate, the market's trading logic around the AI industry chain is undergoing a crucial transformation. The focal point of profit distribution is shifting from upstream hardware towards downstream cloud vendors, a transition that could particularly benefit Hong Kong-listed companies specialising in "soft technology" such as cloud computing. From an industry structure perspective, the Hong Kong market aggregates several of China's premier cloud platform enterprises, making it a direct reflection of this emerging investment thesis. The robust performance of overseas cloud operations also provides a positive reference point for the earnings recovery expectations of Hong Kong cloud firms.
Southbound capital continues to flow steadily into the market, offering incremental support to the Hong Kong tech sector. Throughout this year, mainland capital has maintained a net buying position via the Stock Connect channel. As of September 7th, cumulative southbound net inflows for the year have reached HK$380.8 billion, with the technology sector being a key area of focus. In the quarter ending September 7th, the Information Technology industry recorded net inflows of HK$100.2 billion, ranking first among all twelve Hang Seng Industry Classifications.
Looking ahead, some institutional analyses suggest that with oil prices retreating from their recent cyclical peaks and a market repricing of interest rate expectations for 2026, long-term US Treasury yields may be poised to peak and decline between September and October. For technology stocks, this would represent a second layer of valuation support stemming from improved macro liquidity, following the easing of micro-liquidity pressures seen in July. This could help consolidate market consensus and open a new window for structural opportunities.
With the expansion of Stock Connect targets, the universe of hard-tech assets accessible to mainland investors is broadening. The September 7th adjustment welcomed a total of 54 new companies into Stock Connect, spanning sectors like AI internet, semiconductors, robotics, innovative drugs, and advanced manufacturing. This expansion enriches the supply of hard-tech assets under the connectivity framework. Market analysis views this expansion as mutually beneficial, providing mainland investors with opportunities to participate in the growth of these enterprises while also offering Hong Kong tech firms improved access to mainland capital.
Institutional research points to four potential opportunities in the Hong Kong tech sector for the fourth quarter. Firstly, fundamental cleansings appear to be concluding, with the earnings downgrade cycle potentially nearing its end. Secondly, a capital "seesaw" effect is emerging, with funds potentially rotating from high-valuation growth sectors into undervalued Hong Kong tech assets. Thirdly, if the anticipated cooling in overseas rate hike expectations materialises, it could act as an external catalyst. Fourthly, the expansion of eligible targets under the connectivity programme and related index reforms are expected to attract incremental capital focused on hard technology.
Further analysis suggests that the ongoing development and commercialisation of AI remain the core engine driving sector revaluation. With earnings growth set to resume and valuations undergoing repair, the sector may be entering a medium-term window of opportunity. As a strategic approach, investors are advised to focus on leading enterprises with strong cash flows, stable buyback and dividend policies, and clear AI application scenarios.
For those willing to assume appropriate risk, the Yinhua Hang Seng Stock Connect China Tech ETF (513160) and its feeder funds (Class A: 024037, Class C: 024038, Class I: 024039) offer a diversified entry point. Tracking the Hang Seng Stock Connect China Technology Index (HSSCT.HI), the fund's top ten holdings account for over 85% of its weight, effectively packaging the entire "Hong Kong AI industry chain" – from upstream infrastructure and midstream large models to downstream applications. The fund's constituent stocks span large, mid, and small-cap tech companies, potentially offering greater flexibility and growth opportunities.
Investment involves risk. Investors should carefully consider their own risk tolerance and investment objectives before making any decisions. Funds are long-term investment vehicles designed to diversify risk but do not guarantee returns or a fixed income stream. The value of fund units can fluctuate. Past performance is not indicative of future results. For comprehensive information, including fee structures and risk factors, investors should refer to the fund's prospectus and relevant legal documents. The fund may invest in stocks listed via the Stock Connect mechanism, which carries specific risks related to market differences, trading rules, and investment environments.