(Bloomberg) -- Chinese technology stocks came under renewed pressure on Monday, reflecting supply concerns over the fundraising plans of Alibaba Group Holding Ltd. and Yangtze Memory Technologies Co.
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The Hang Seng Tech Index fell as much as 4%, as e-commerce giant Alibaba raised HK$80 billion ($10.2 billion) in Hong Kong's biggest secondary share sale. In the mainland market, the chip-heavy STAR 50 gauge dropped 3.8% to its lowest in about three weeks, after the Shanghai bourse accepted the application of chipmaker Yangtze Memory's likely sizable initial public offering.
The selloff came as Asian tech stocks also weakened amid fresh doubts about the durability of the popular AI trade ahead of key earnings from major firms including Nvidia Corp. later this week. The share sales by Alibaba and Yangtze Memory soured sentiment further in China given the expected earnings dilution for Alibaba and worries that other tech firms may follow suit.
"Those companies investing in AI are all raising funds by issuing new shares — essentially spreading the cost of AI investment across the public and investors," said Xiang Xiaotian, director at Shanghai Chengzhou Investment Management. "There still haven't been clear returns on those outlays and so whether the financing is through equity or debt to fund AI, investors will remain somewhat uneasy."
Shares of Alibaba's rival Tencent Holdings Ltd. dropped as much as 4.1%, while Baidu Inc. also lost 4.5% even after saying it has no plan for a new share placement.
"Alibaba's move was a complete curveball that came out of nowhere," said Vey-Sern Ling, managing director at Union Bancaire Privee. "Raising funds like this will surely be negative for sentiment across the whole China Internet sector."
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