By Sherry Qin and Tracy Qu

China's tech rally shows no signs of slowing, with shares gaining on Wednesday as a fundraising surge by big players and fresh artificial-intelligence buzz fuel appetite for the sector's top stocks.

AI and internet giant Baidu led the charge in Hong Kong, sitting 16% higher--its biggest gain in over three years. E-commerce juggernauts climbed too, with Alibaba Group up 5.3%, Meituan rising 4.9% and JD.com trading 5.15% higher.

The Hang Seng Tech Index, where many of the biggest Chinese tech players are listed, rose 4.2% to an almost four-year high. That puts the year-to-date gain to over 40%.

The latest leg of the rally comes as years of heavy investing by Baidu, Alibaba and Tencent in AI and advanced chips start bearing fruit.

Recent bond sales have also eased funding concerns, boosting investors' confidence in tech names.

"Put together, it's a recipe for outsized moves given how under-owned the market has been," Saxo chief investment strategist Charu Chanana said.

Beijing's bid to reduce reliance on foreign technology has also set a positive policy backdrop, a welcome change from years of regulatory crackdowns on the domestic tech sector. That is fueling hopes that more chips could be made in China to replace imports.

Chinese tech firms' push to develop their own chips has renewed China's AI cloud sector narrative, Goldman Sachs analysts said, reducing dependence on overseas supply.

Individual advances by Chinese firms in AI are lifting sentiment too.

Home-grown large-language models, or LLMs, have gained global recognition since Chinese AI startup DeepSeek's low-cost, high-performing offering made waves in January. Alibaba's Qwen models have scored high in international benchmarks, while Tencent has rolled out a suite of AI applications this week, signaling how competition is prompting local companies to step up their game.

Baidu's major AI contract with a state-owned firm helped drive its outperformance on Wednesday, Citi analysts said in a note.

Baidu's chip unit is also burnishing the stock's appeal. It recently won an AI supply deal with Chinese conglomerate China Mobile, which shows that the company's in-house chips are in higher demand as an alternative to foreign products.

Baidu's AI chip could boost group revenue and profit given the scarcity of suitable AI chips in China, Arete Research analysts said as they upgraded the stock to buy from sell.

"With promising cloud revenues growth leveraging LLM + cloud + chip, Baidu has finally unlocked its hidden value," Citi said.

Alibaba too has developed a new chip that is more versatile than its predecessors, The Wall Street Journal reported last month.

A sudden burst of fundraising after a long period of inactivity adds more conviction to the China play, analysts say. Companies are moving aggressively to secure capital to invest more in AI, suggesting that they have more in their pipelines.

Tencent on Wednesday said it planned to issue debt to raise about $1.27 billion. That came after Alibaba said that it will raise $3.2 billion via convertible bonds to improve its cloud infrastructure. Baidu this week completed a $618.5 million offshore bond offering.

Jefferies analysts view Alibaba's bond offering as a sign of the company's confidence in its outlook and expect cloud revenue to keep growing rapidly.

CreditSights' Zerlina Zeng said that she sees several reasons for the rise in offshore fundraising by big China tech, including large capex for AI capacities and cloud infrastructure, and funding for overseas investment.

"[The] AI push is a positive equity story but may pressure their near-term credit stance," she added.

While the sharp gains may cause some to question whether there is more room to run, Capital Economics sees scope for more upside.

Though listed companies likely won't be able to shake off the drag from China's economy forever, things seem to be going well for now, said Thomas Mathews, head of APAC markets. "It looks to us that there's little to stand in the way of further gains in China's stock market."

Write to Sherry Qin at sherry.qin@wsj.com and Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

September 17, 2025 05:36 ET (09:36 GMT)

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