China's tech giants are reeling from a $600 billion market value wipeout as the Hang Seng Tech Index plunges 28% from October highs. The selloff, initially sparked by DeepSeek's AI breakthrough, has intensified amid spiraling memory-chip costs and aggressive AI spending by companies like ByteDance, which poured $1.1 billion in subsidies during Lunar New Year holidays.

Investors are fleeing megacaps like Tencent and Alibaba, which face mounting pressure from AI-driven capital expenditures. Goldman Sachs recently slashed Alibaba's price target, warning of higher-than-expected spending through 2028 as the e-commerce giant battles for AI leadership. The profit impact is already visible, with Alibaba expected to report a 45% decline in net income for the December quarter.

While traditional internet giants struggle, emerging AI players like MiniMax and Zhipu have surged over 280% since January debuts, creating a "see-saw" effect in the market. Some analysts see opportunity in oversold big tech stocks trading at less than 17 times forward earnings, but others remain cautious about sustainability. With earnings reports looming and government support potentially on the horizon, the sector faces a critical juncture as investors weigh whether AI investments will deliver returns or continue draining profits.