Simon Yuan, Citi’s head of China investment banking and head of its financial institutions group in Asia-Pacific, said recent valuation pullbacks among data centre companies, largely originating in the United States, were unlikely to halt the pipeline of Chinese AI-related listings in Hong Kong.
Speaking on the sidelines of the International Monetary Fund meetings in Bangkok, Yuan said the market continued to benefit from a relatively balanced mix of domestic and international investor demand, providing a degree of support for Chinese companies seeking to raise capital.
The presence of domestic liquidity, particularly growing investment flows from mainland China into Hong Kong equities, has emerged as an important source of demand for new listings.
Yuan said the combination of local and international participation was helping sustain market activity even as investors reassessed the valuations of companies exposed to the global AI infrastructure boom.
However, he cautioned that Hong Kong would not be insulated from a broader downturn in the technology sector.
“If the whole AI cycle turns in the US — and we have seen some volatility in the last few weeks — you will see an impact everywhere, Hong Kong included,” he warned.
Mainland Capital Supports Hong Kong IPO Market
The resilience of Hong Kong’s equity capital markets is being reinforced by investment from mainland Chinese investors, whose growing participation has helped provide liquidity for companies seeking public listings.
According to Yuan, Chinese companies planning to list in Hong Kong are benefiting from demand that is roughly evenly divided between domestic Chinese and international investors.
The growing contribution of southbound capital — funds flowing from mainland China into Hong Kong’s financial markets — has become a particularly significant source of buying interest.
This pool of liquidity could help support new offerings as companies navigate changing investor expectations and heightened scrutiny of AI-related valuations.
Nevertheless, the market’s performance remains closely linked to global technology sentiment. A significant correction in US-listed AI and data centre companies could prompt investors elsewhere to reassess their exposure, potentially affecting valuations and the reception of new Hong Kong offerings.
Chinese Hardware Suppliers Benefit from AI Boom
Chinese hardware manufacturers and other suppliers serving the AI infrastructure industry have benefited from the rapid expansion of global demand for computing capacity.
Yuan said these companies had recorded growth in sales volumes alongside higher unit prices, reflecting the commercial opportunities created by the worldwide investment in AI infrastructure.
Some Chinese hardware companies have also established manufacturing operations outside mainland China, a move Yuan said could help them serve international customers more effectively while reducing exposure to geopolitical friction.
Such overseas manufacturing footprints may provide greater flexibility for suppliers seeking to expand their global customer base amid trade tensions and changes in technology supply chains.
The combination of stronger demand, improved pricing and broader international operations has helped Chinese hardware companies position themselves to benefit from the AI investment cycle.
However, their future market performance will depend partly on whether current infrastructure spending remains sustainable and whether investors continue to view their valuations as justified by earnings growth and business prospects.
AI Models and Applications May Drive Next IPO Wave
Looking ahead, Yuan expects Hong Kong’s equity capital markets to experience a shift in emphasis next year, with investor attention moving beyond hardware suppliers towards Chinese AI model developers and application companies.
The potential transition would reflect a broader evolution in the AI industry, as investors increasingly examine how companies translate technological capabilities into commercial products, recurring revenue and sustainable profits.
While hardware suppliers have benefited directly from demand for the infrastructure needed to develop and operate AI systems, model developers and application providers face a different test: demonstrating that their technologies can generate durable commercial returns.
Yuan stressed that companies seeking to attract investors would need to demonstrate solid business fundamentals rather than rely solely on enthusiasm surrounding artificial intelligence.
“But these companies need to have a proven business model. They need to show very strong growth and profitability,” he said.
The comments underline the importance of financial performance as the AI investment landscape matures. Investors may increasingly distinguish between companies with established revenue streams and those whose valuations depend primarily on expectations of future technological growth.
For prospective issuers, the ability to demonstrate sustained demand, credible monetisation strategies and a path to profitability could therefore become central to securing investor support.
Hong Kong IPO Fundraising Records Strong Growth
Hong Kong’s equity capital markets have recorded substantial activity amid continued funding demand from Chinese technology companies.
A total of 118 companies went public in the city during the first nine months of the year, raising HK$388 billion, equivalent to approximately US$49.4 billion. The amount represented a 106 per cent increase from the corresponding period a year earlier.
The fundraising figures highlight Hong Kong’s continuing role as a major financing destination for Chinese businesses seeking access to domestic and international investors.
The outlook for the coming months will depend on several factors, including global technology valuations, the availability of investment capital, the strength of demand for AI infrastructure and the ability of prospective issuers to demonstrate credible business models.
Although concerns over valuations and market volatility remain, Yuan’s assessment suggests that the pipeline of Chinese AI-related listings is likely to continue, supported by mainland liquidity and international investor participation.
The anticipated shift towards AI models and application developers could also broaden the composition of Hong Kong’s technology IPO market, provided companies can demonstrate the growth and profitability investors increasingly demand.