China's 'Seven Titans' tech stocks slump as deflation overpowers AI boom

According to Nikkei Asia, China's 'Seven Titans' tech stars lost a combined $290 billion in market cap in May. Alibaba shares fell 13.8%, Tencent 11.2%, Pinduoduo 14.5%, JD 9.4%, Meituan 12.1%, Baidu 10.8% and NetEase 8.3%. The CSI information technology index closed the week 5.7% lower in Shanghai; the Hang Seng Tech index dropped 6.3% in Hong Kong.

Nikkei correspondent Cissy Zhou points to the deflation prints released through May: producer prices contracted 2.7% in April, marking 14 consecutive months of contraction, while consumer prices fell 0.3%, the third straight month in negative territory. Goldman Sachs's China chief economist Hui Shan told Nikkei that 'consumer demand is visibly failing to hold its grade; the household income-savings dynamic has overpowered the AI micro story'. JPMorgan China tech strategist Alex Yao said in a sector note that 'AI revenue reached 6.2% of consolidated balance sheets in 2026, but the deterioration in core retail e-commerce margins more than offsets it'.

Capital outflows in May were also pronounced. EPFR data show foreign investors withdrew a net $12.4 billion from Chinese tech ETFs, more than the $8.1 billion in the prior month. The 'New Consumption Demand' support package Beijing announced in February is expected to enter its expansion phase by September. Goldman says the package's effectiveness 'has been limited over the past three quarters'. State Council spokesperson Hu Kaihong said Friday that 'structural reforms will continue along a macro-stability path'.