Hong Kong experienced a period of high IPO activity through 2025 and early 2026, with many companies attempting to leverage AI narratives to secure premium valuations. However, this strategy has backfired as market excitement for AI has cooled, and investors are now scrutinizing whether AI is genuinely a company's core competitive advantage or merely a marketing tactic.
The market's shift has been brutal for companies that over-relied on AI hype. Several issuers who achieved initial listing and index thresholds based on inflated AI promises have seen catastrophic valuation collapses, with stock prices sometimes dropping over 20% in a single day or plummeting more than 80% from their peak valuations. Analysts attribute these declines to a mismatch between weak operational fundamentals and inflated IPO valuations.
This pattern indicates a broader market trend where investors are less forgiving of companies with exaggerated technology narratives. Such failures can lead to severe reputational crises, making it challenging for companies to regain market trust. The current regulatory environment in Hong Kong also poses significant risks for companies that falsely present themselves as AI businesses.
Simultaneously, global AI stocks experienced a significant downturn. On September 14, 2026, AI-linked stocks plunged worldwide after leaders of major AI companies warned about the risks of rapid development. This led to a 1.2% slide in the Nasdaq 100, reaching a six-week low, with chip stocks being particularly affected. This global skepticism further compounds the challenges faced by Hong Kong's market.
On September 10, 2026, Hong Kong's three major indices weakened, with the Hang Seng Index down 1.27%, the Hang Seng TECH Index down 2.04%, and the Hang Seng China Enterprises Index down 1.13%. AI concept stocks, especially the large model sector, were broadly under pressure. For instance, Z.AI fell 10.34%, and MINIMAX-W dropped 8.98%. This decline was partly triggered by DeepSeek lowering its DS V4 Flash model pricing and a bearish research report from Jefferies, putting systematic valuation pressure on the large model sector.
