Hang Seng Tech Index falls 1.21% as Baidu plunges 13%

Baidu's 13% slide after a Q2 earnings miss led a broad tech selloff in Hong Kong, with semiconductor and optical communication shares hit hardest.

The Hang Seng Tech Index fell 1.21% Wednesday as Baidu plunged 13% after a second-quarter earnings miss, dragging semiconductor and optical communication shares lower.

"Investors are increasingly focused on earnings quality and companies' ability to turn artificial intelligence investments into sustainable revenue," Reuters reported, as concerns about China's broader economic outlook continued to weigh on investor confidence.

Baidu's Hong Kong-listed shares dropped 13% to HK$87.95, their lowest since Aug. 28, 2025. Non-GAAP net income reached CNY2.6 billion, about 16% below the CNY3.1 billion Visible Alpha consensus, while revenue of CNY31.33 billion missed the CNY31.95 billion estimate. Online marketing services revenue fell 19% year over year to CNY13.1 billion, though AI Cloud Infrastructure revenue climbed 50% to CNY7.3 billion and GPU Cloud revenue surged 283%.

The Hang Seng Index still managed a 0.09% gain, supported by property and financial stocks after China revised housing provident fund rules. But the tech-heavy losses extended across the region: the CSI300 fell 2.4% and the Shanghai Composite dropped 2%, with semiconductor shares down about 7% on the mainland as long-term borrowing costs climbed.

Baidu's AI Growth Can't Offset Ad Weakness

Baidu's core online advertising business remains the key drag. Online marketing services revenue declined 19% year over year to CNY13.1 billion as advertising demand stayed weak. Revenue from legacy operations dropped 23% to CNY10.4 billion, while total Baidu General Business revenue decreased 4% to CNY25.2 billion.

In contrast, Baidu Core's AI-powered operations generated CNY12.5 billion in revenue, representing 25% year-over-year growth and roughly half of General Business revenue. Non-GAAP diluted earnings came in at CNY7.22 per American depositary share, down sharply from CNY12.06 a year earlier and below the CNY9.84 consensus forecast.

The selloff extended well beyond Baidu. Hua Hong Semiconductor fell more than 11%, SMIC dropped over 3%, and optical communication names including Innolight and Changfei Optical Fiber each fell more than 10%. PCB makers also sold off, with Kingboard Laminates down over 6% and Guanghe Technology down over 9%. Cambridge Technology and Huiju Tech each fell more than 11%.

On the mainland, the CSI Robot Index dropped more than 6% and the STAR50 index declined 6.07%, even as humanoid robot maker Unitree surged nearly 500% in its Shanghai debut. China Unicom also fell nearly 8% after reporting a more than 30% decline in first-half net profit.

Large-cap tech diverged sharply: Xiaomi rose nearly 5% and Meituan gained about 2%, while Alibaba slipped nearly 2%. The divergent performance suggests rotation within the sector as investors favor names with clearer earnings visibility.

The selloff highlights the challenge facing Chinese tech companies as they transition from legacy businesses to AI-driven models. Baidu's results show that even strong AI growth — GPU Cloud revenue up 283% — has not been enough to offset structural weakness in advertising, raising questions about how quickly the AI transition can restore profitability.

This article is for informational purposes only and does not constitute investment advice.