2025 Hong Kong and US stock market review, driven by the AI boom and cyclical recovery? | Research report | In-depth analysis | Potential stocks | AI

The global financial market in 2025 unfolds its annual dynamics amidst a complex mix of variables. Repeated adjustments to the U.S.'s 'reciprocal tariff' policy, explosive growth in the AI industry, multiple interest rate cuts by the Federal Reserve combined with technical balance sheet expansion measures, and the divergent recovery patterns between developed economies and emerging markets collectively dominate the year’s trends for Hong Kong and U.S. stocks. In the Hong Kong market, the year 2025 sees a volatile upward trend, marking the best annual performance in years. $Hang Seng Index (800000.HK)$The cumulative increase for the year reached 27.77%, hitting a new high since 2017. $Hang Seng TECH Index (800700.HK)$A rise of 23.45% was recorded, achieving the best historical performance since the index's inception. Policy support, the return of domestic and foreign capital, and structural opportunities have become core drivers. The technology giants, hard tech, gold stocks, and innovative drug sectors performed exceptionally well, while Hong Kong's IPO market also saw explosive growth, with total fundraising ranking at the top of global exchanges.

In the U.S. market, 2025 continues the strong momentum, with the three major indices achieving double-digit gains for the third consecutive year. $S&P 500 Index (.SPX.US)$An increase of approximately 16.4% for the year. $Nasdaq Composite Index (.IXIC.US)$A surge of 20.4%, $Dow Jones Industrial Average (.DJI.US)$Up 12.9%. Despite a short-term plunge in early April due to tariff threats, it quickly rebounded supported by Federal Reserve rate cuts, the AI boom, and resilient corporate earnings. Market liquidity remains abundant, with continuous inflows from retail funds and corporate buybacks; however, high valuations and the pressure to realize AI-driven profits also become potential risks at year-end.

The core logic behind the US stock market's rise in 2025 lies in the powerful resonance formed by the explosion of the artificial intelligence industry and the Federal Reserve’s accommodative monetary policy. In the AI sector, the construction of global AI infrastructure has entered a period of explosive growth, with computing power demand increasing exponentially, driving both earnings and valuations higher for companies across related supply chains. $NVIDIA (NVDA.US)$ NVIDIA, with its GPU and CUDA ecosystem, monopolizes 80%-90% of the AI chip market, emerging as the biggest winner. On October 29, its market capitalization surpassed the $5 trillion mark, making it the first company globally to achieve this milestone. NVIDIA's market value jumped from $4 trillion to $5 trillion in just 113 days, showcasing astonishing growth momentum. Notably, although NVIDIA's October quarterly earnings report exceeded expectations for both revenue and net profit, and projected $500 billion in revenue visibility for future Blackwell and Rubin chips, the AI sector still saw high openings followed by declines the next day, with related stocks falling collectively, reflecting market caution over an AI bubble. The AI boom further spread to the storage sector, kicking off a 'super storage cycle.' $SanDisk (SNDK.US)$ With a year-to-date increase of 376%, it became the top-performing stock in the S&P 500. $Micron Technology (MU.US)$ As the leader in storage, it delivered outstanding performance, with annual revenue reaching $37.378 billion and net profit at $8.539 billion. First-quarter revenue grew 56.7% year-over-year to $13.64 billion, while operating profit surged 168.1% year-over-year to $6.419 billion, with its stock price rising over 200% year-to-date. $Western Digital (WDC.US)$ 、 $Seagate Technology (STX.US)$ Other major storage giants also saw their stock prices rise more than 200% year-to-date.

The core turning points and controversies in the US stock market in 2025 revolved around key events. In early April, U.S. President Trump signed an executive order announcing 'reciprocal tariffs' on all trading partners, triggering panic selling in the market and causing a 'Black 48 Hours' crash. The US stock market lost $6.6 trillion in value over two days. $S&P 500 Index (.SPX.US)$ The cumulative decline over two days reached 10.53%, $Russell 2000 Index (.RUT.US)$ and $Nasdaq Composite Index (.IXIC.US)$ Successively falling into a technical bear market, hitting the lowest point of the market for the year. Thereafter, as the Trump administration gradually rolled back aggressive tariff measures, market panic subsided, compounded by the ongoing fermentation of AI themes, US stocks embarked on a strong rebound. The S&P 500 index surged from its low of 4835.04 points on April 7 to reach a maximum increase of 43.65% by year-end, completing a deep recovery.

By year-end, the debate over an AI bubble became the market's focus. Michael Burry, the real-life inspiration for 'The Big Short,' re-emerged, pointing out that the current AI craze has evolved into an irrational frenzy, questioning issues such as the lifespan of NVIDIA chips and equity dilution, while targeting core AI stocks via put options. Behind this controversy lies market concern over high valuations: the Buffett Indicator (total stock market capitalization/GDP) has risen to 223%, far exceeding the reasonable range of 70%-80%, even surpassing the peak during the dot-com bubble in 2000, signaling potential market correction risks. On the industry level, doubts have been raised about OpenAI's solvency; its massive collaborations with cloud vendors and chip companies exceed current revenue, coupled with debt financing issues for partners like CoreWeave, further intensifying market vigilance toward the AI bubble. Meanwhile, Google’s release of the Gemini 3 model outperforms ChatGPT and is trained on proprietary TPUs, reducing reliance on NVIDIA chips, impacting sector sentiment. $Oracle (ORCL.US)$ The rollercoaster ride of Mixue Group’s market value also epitomizes the market's rational return. In September, its market value skyrocketed due to optimistic cloud service performance expectations, briefly making the founder the world's richest person. However, subsequent issues such as deteriorating free cash flow and high debt led to a stock price correction of over 40%, highlighting how the market began scrutinizing the profitability of AI narratives.

In 2025, Hong Kong's stock market exhibited the characteristic of ‘volatile bottoming-out and gradual recovery,’ with the core index fluctuation narrowing throughout the year, and structural opportunities becoming prominent. Closing data shows that Hong Kong's three major indices maintained an upward trend, recording annual gains for the second consecutive year. Specifically, $Hang Seng Index (800000.HK)$ It rose cumulatively by 27.77% for the entire year, $Hang Seng TECH Index (800700.HK)$ With an annual increase reaching 23.45%, $Hang Seng China Enterprises Index (800100.HK)$ Also achieving an annual gain of 22.27%. From trading data, liquidity in Hong Kong's stock market showed characteristics of ‘phased improvement,’ with some trading days at year-end breaking through HKD 200 billion in turnover, indicating increasing attention from investors to Hong Kong stocks, though overall liquidity remained weaker than in the US stock market.

In the consumer sector, although November economic data showed that domestic demand remains weak and the recovery in real estate is uncertain, Southbound funds have continuously rotated between high and low valuations over the past three months, increasing positions in retail trade, consumer services, and other sectors, reflecting defensive portfolio adjustments. At present, the overall valuation of Hong Kong's consumer sector is at the 30th percentile of the past five years, making it attractive on a global scale, particularly with $POP MART (09992.HK)$ 、 $LAOPU GOLD (06181.HK)$ 、 $MIXUE GROUP (02097.HK)$ the 'new consumption trio,' represented by Mixue Group, showing particularly representative performance. The three saw significant stock price increases in the first half of the year but underwent deep adjustments in the second half. As of the December 31 close, they had fallen 45%, 43%, and 33.8%, respectively, from their highest points of the year. From a performance perspective, the fundamentals of these companies have not deteriorated. For example, Mixue Group’s revenue and net profit growth in the first half of the year reached 39.3% and 44.1%, respectively, while Laopu Gold’s adjusted net profit under non-IFRS standards grew 290.6% year-on-year in the first half. Current valuations have returned to reasonable levels. Additionally, the travel chain (hotels, airlines, online travel agencies) benefited from optimized supply-demand dynamics, and the auto sector, spurred by policies like L3 autonomous driving, presents left-side allocation value. The steady appreciation of the renminbi also boosts foreign capital confidence in allocating to Hong Kong stocks, providing extra support for market recovery.