Hang Seng Tech Index slides 2% as oil surge, AI spending fears hit

The Hang Seng Tech Index fell 2% on Thursday, tracking a global tech rout after Alphabet's AI spending plans and surging oil prices rattled investors.

"Investors are already feeling increasingly jittery about the sustainability of the AI rally," said Gerald Gan, chief investment officer at Reed Capital in Singapore. "That said, any short-term correction is likely to attract dip buyers once again."

The decline extended losses for a fourth consecutive session, with the broader Hang Seng Index also under pressure. The selloff mirrored weakness on Wall Street, where the Nasdaq Composite tumbled 2.15% to 25,137.69 and the S&P 500 lost 1.21% to 7,408.30. In mainland China, the Shanghai Composite fell 0.5%.

The dual shock — a 7% surge in Brent crude past $100 a barrel and a 7% drop in Alphabet shares after the Google parent lifted its 2026 capital expenditure forecast to as much as $205 billion — has reignited concerns that higher energy costs and aggressive AI spending could keep interest rates elevated, threatening valuations across the technology sector.

The selloff in Hong Kong tech stocks was led by heavyweight names sensitive to both higher oil prices and rising bond yields. The 10-year U.S. Treasury yield briefly topped 4.7%, its highest level since January 2025, while the 2-year yield touched 4.37%. Fed funds futures now price in a more than 80% chance of a rate increase in September, up from 52% a week ago, according to the CME FedWatch tool.

Oil prices surged after Yemen's Houthi militant group claimed attacks on two Saudi Arabian tankers in the Red Sea, opening a new front in the Middle East conflict. President Donald Trump threatened to bomb Iranian infrastructure, warning that any Iranian attack on shipping in the Strait of Hormuz would trigger U.S. strikes. Brent crude settled at $100.69 a barrel, its highest level since before the U.S. and Iran reached a ceasefire agreement last month.

The tech sector faced additional pressure from Alphabet's earnings, which fueled concerns about the return on massive AI investments. The Google parent raised its 2026 capital expenditure forecast to between $195 billion and $205 billion, up from a prior range of $180 billion to $190 billion. Other hyperscalers including Meta Platforms, Microsoft and Amazon also declined Thursday, as investors questioned whether the spending would translate into proportional revenue growth.

Tesla dropped 14% after posting a big earnings miss for the second quarter, with operating expenses rising faster than revenue and both Tesla and Alphabet reporting negative free cash flow.

In currency markets, the offshore yuan traded near 6.7762 per dollar, while the yen held at 163.76. Gold extended its decline to about $4,040 an ounce as higher interest rate expectations reduced the appeal of non-yielding assets.

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