The Chinese stock market recorded a significant decline during February 2026, with technology shares listed in Hong Kong facing the greatest pressure. Market experts say investor focus has shifted from rapid growth to profitability, cash flow stability, and financial sustainability. This change has led to increased selling pressure in several major technology stocks.
Hang Seng Tech Enters Bear Market Territory
The benchmark Hang Seng Tech Index has fallen nearly 10 percent this month. This is considered the largest monthly decline since January 2024. From its peak in October 2025, the index has dropped about 23 percent, placing it clearly in bear market territory, according to market analysts.
Weak Earnings and Rising Costs Hit Profits
Experts attribute the decline in Chinese tech stocks mainly to weak corporate earnings and intensifying competition. Revenue growth of companies has slowed compared to earlier levels, while operational costs and investment expenses continue to rise. As a result, profit margins are under pressure and investor confidence has weakened.
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AI Investments Fail to Boost Short-Term Revenue
Analysts also note that despite heavy investment in the technology sector, the short-term impact of such spending is not yet clearly visible in company earnings. Investments in artificial intelligence projects have increased, but the immediate contribution to revenue remains relatively limited. Rising expenses are putting additional strain on corporate finances and affecting overall market sentiment.
Mainland Investors Shift to Profit Booking
Behavioral patterns of mainland investors have also changed. Investors who previously showed strong buying interest in Chinese tech stocks are now adopting profit-booking or selling strategies. In the Hong Kong market, sales worth billions of Hong Kong dollars have been recorded recently, further weakening market sentiment.
Major technology companies have also been affected. Shares of search engine and AI business company Baidu have fallen more than 19 percent this month. Weakness in the company’s advertising business and AI segment is considered a key factor behind the decline. Concerns over quarterly earnings performance have also increased among investors.
Market participants are now closely watching upcoming earnings results. The financial performance of companies such as JD.com and Bilibili is expected to play a crucial role in determining the future direction of the tech sector. If earnings growth signals remain weak, market pressure may continue.
However, broader Asian markets have shown relatively stable performance, indicating that the weakness is largely confined to the Chinese technology sector. This decline also highlights sector-specific risk. Experts believe that if corporate earnings fail to improve and competition continues to intensify, pressure on tech stocks may persist.
Regarding future risks, analysts say that companies’ cash flow and profitability will be the most important factors for investors. If the pace of earnings growth does not improve, volatility in Chinese tech shares may continue. Global investors are also keeping a close watch on upcoming quarterly results and the overall economic condition of the technology sector.
About the author – Rehan Khan is a law student and legal journalist with a keen interest in cybercrime, digital fraud, and emerging technology laws. He writes on the intersection of law, cybersecurity, and online safety, focusing on developments that impact individuals and institutions in India.
