In China Stock Markets, Tech Is the Talking Point but Earnings Also in Play

China's stock market trading this week was dominated by tech shares, with many companies reporting improved earnings results but some investors still spooked by concerns about the sustainability of the AI boom. The market also had to digest a heavy load of interim earnings.

The benchmark Shanghai Composite Index edged down 0.1 percent on Friday but wrapped up the week with a gain of 1.2 percent after tech shares rose in the afterglow of Nvidia's better-than-expected second-quarter net income. The Shenzhen Component Index, however, lost 1 percent for the week The tech-focused ChiNext in Shenzhen declined 3.4 percent and the Nasdaq-style STAR Market 50 index in Shanghai lost 1.42 percent despite the rebound on Thursday. Hong Kong's Hang Seng Index retreated 1.2 percent for the week.

"Tech shares have turned out to be a major leverage in today's stock markets," Yin Jianfeng, deputy director of the China Chief Economist Forum, told a recent event hosted by Fudan University's School of Management. "China's economy has presented a substantial 'K-shaped' growth model, led by high-performance in tech-driven sectors while industries like property and traditional manufacturing have become drags on growth."

Domestic chipmaking giant Changxin Memory Technologies (CXMT) reported on Friday that it turned to a half-year net profit of 77.6 billion yuan (US$11.6 billion) from a year-earlier loss of 2.3 billion yuan. Since its debut on the STAR Market in July, CXMT shares have risen 8.9 percent.

Leading Chinese AI developer MiniMax posted a nearly fourfold surge in first-half revenue to US$117 million this week, driven by strong demand for models that offer lower-cost options for deploying AI at scale. Its loss in the first half narrowed to US$358 million from US$402 million from a year earlier. MiniMax closed up 3.8 percent on Thursday in Hong Kong but lost 4.5 percent on Friday.

AI model and infrastructure firm SenseTime declined 3 percent on Thursday but jumped 3.8 percent on Friday after reporting its first six-month profit turned to 620 million yuan from a loss of 1.6 billion yuan a year ago. Revenue rose 23 percent to 2.9 billion yuan.

"The 'AI bubble' is a fake issue in China, where AI is on an early but fast developing track and is still far from being a bubble," said Gu Chenhao, an analyst with Huizheng Finance.

Nvidia's founder and Chief Executive Jensen Huang declared this week that the AI industry has reached a "golden age." But for legendary investor Larry Richard Williams, AI may be a good option for investment, but it is yet to be the one to decide what to invest in.

"Mechanical investment, so far, has been proven to be less successful than judgmental investment," Williams said in Shanghai on Tuesday at a meeting of Huizheng Finance, adding that investors can find good companies for investment only in China or the US.

In Hong Kong trading, Li Auto shares fell 1.3 percent on Friday after the leading Chinese carmaker swung to a second-quarter loss of 1.7 billion yuan from a year-earlier profit of 1.1 billion yuan, though the loss narrowed from 2.3 billion yuan in the first quarter. Domestic carmakers are reporting six-month losses amid weaker sales on the Chinese mainland and fierce competitive pricing, despite gains in overseas sales.

Major aluminum producer Chalco had a share gain of 3.6 percent after reporting first-half net profit surged 68 percent from a year earlier to a record 11.9 billion yuan on higher aluminum prices and cost controls.

Across Asia, Japan's Nikkei advanced 3.2 percent in the past five trading days while South Korea's Kospi advanced 2.9 percent.

Major indexes on Wall Street fell on Friday after US Federal Reserve Chairman Kevin Warsh, delivering the keynote address to the annual meeting of central banks in Jackson Hole, Wyoming, sent his strongest signal to date that interest rates may have to rise amid persistent high inflation. His remarks came after the Personal Consumption Expenditures index, a favorite Fed benchmark for inflation, was reported at 3.7 percent in July, above the central bank's 2 percent target.

The broad S&P 500 index lost 0.25 percent on Friday but posted a weekly gain of 0.5 percent. The Nasdaq fell 0.5 percent but eked out a weekly gain of 0.9 percent.