SynopsisChinese equities declined on Monday as a global selloff in AI-linked stocks weighed on semiconductor shares, while Hong Kong's technology sector outperformed after Alibaba unveiled its latest AI model. Investors also remained cautious after fresh data showed China's manufacturing activity expanded at its slowest pace in four months.APChinese equities fell as AI-linked semiconductor stocks came under pressure, while Alibaba boosted Hong Kong tech shares.Chinese equities traded lower in early trade on Monday as a global selloff in artificial intelligence (AI)-linked stocks weighed heavily on semiconductor companies. Meanwhile, Hong Kong-listed technology firms outperformed after Alibaba unveiled its latest AI model, according to Reuters.The benchmark CSI300 Index declined 0.7% by the midday break, while the Shanghai Composite Index slipped 0.6%. In Hong Kong, the Hang Seng Index was largely unchanged as gains in major internet stocks helped offset weakness in the broader market.Global AI correction weighs on semiconductor stocksInvestor sentiment towards AI-related stocks remained under pressure following a broad global correction in the sector. The decline has prompted investors to reassess valuations across semiconductor companies, including those in China.The technology-focused STAR50 Index dropped 3.7%, while the CSI All Share Semiconductor Index tumbled 5.2%, making chipmakers the worst-performing segment of the market.Despite the sector-wide weakness, shares of newly listed memory chipmaker CXMT advanced 2.7%. Reuters reported that investors viewed the company's valuation as relatively reasonable compared with smaller peers in the semiconductor space.Analysts see better long-term opportunityMarket volatility has led investors to rebalance their portfolios after a sharp correction in AI-related stocks.Analysts at China International Capital Corporation (CICC) believe the recent pullback could improve the medium- to long-term investment case for AI, provided the broader AI industry remains on its growth trajectory. They also noted that portfolio rebalancing is a natural response following the recent turbulence, even as AI continues to be viewed as a key long-term investment theme.Alibaba surges after launching new AI modelAlibaba emerged as one of the biggest gainers in Hong Kong, with its shares jumping nearly 7% after unveiling Qwen3.8-Max, which the company described as its largest and most capable artificial intelligence model to date.The rally lifted sentiment across Hong Kong's technology sector, with major internet companies collectively gaining nearly 1%, helping the Hang Seng Index outperform mainland markets.Manufacturing data adds to cautious moodInvestor caution was also influenced by fresh economic data showing China's manufacturing sector expanded at its slowest pace in four months during July.According to Reuters, the latest private-sector survey indicated that while factory output and new orders continued to grow, the pace of expansion moderated. Export orders returned to growth after contracting in the previous month, offering some support but failing to offset broader concerns over slowing momentum.Market outlookThe combination of a global AI-led equity correction and signs of moderating manufacturing activity has kept investors cautious toward Chinese equities. However, strength in Hong Kong's internet giants, particularly Alibaba following its latest AI announcement, suggests investors continue to differentiate between companies with strong AI growth prospects and those facing valuation pressures in the semiconductor segment.Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless