Hong Kong shares closed at their highest level in four years on Wednesday, buoyed by technology stocks, as confidence in the mainland's artificial intelligence capabilities and signs of progress in a potential US deal involving TikTok lifted appetite for risk assets.

The benchmark Hang Seng Index climbed 469 points, or 1.78 percent, to end at 26,908.

The Hang Seng Tech Index, which represents the 30 largest technology companies listed in Hong Kong, rose over 4 percent while the Hang Seng China Enterprises Index jumped over 2 percent.

Tech majors jumped 4.2 percent following an overnight rally of their counterparts in New York.

Baidu surged nearly 16 percent to its highest level since October 2023. Shares of Alibaba were up 5 percent at their strongest point since November 2022.

The CSI Semiconductor Material & Equipment Thematic Index rose 3.6 percent, with chip maker SMIC shares up nearly 7 percent following media reports that the company was running trials on the country's first domestically produced advanced chipmaking equipment.

A number of key developments across AI infrastructure layers in the mainland have been noteworthy, including renewed narratives around the AI infrastructure layer and new Chinese AI model launches, Goldman Sachs' analysts said in a note.

The investment bank lifted Alibaba's 12-month target price to HK$174, assuming higher cloud growth based on its latest AI full-suite offerings and resilient computing demand.

Media reports last week pointed to Alibaba and Baidu having started using internally designed chips to train their AI models, partly replacing those made by Nvidia.

Across the border, the benchmark Shanghai Composite Index ended up 0.37 percent at 3,876 while the Shenzhen Component Index closed 1.16 percent higher at 13,215.46 points.

The combined turnover at these two indexes was 2.38 trillion yuan, up from 2.34 trillion yuan on Tuesday.

Stocks related to the power equipment and automotive manufacturing sectors led gains while shares in agriculture and liquor industries saw notable declines.

Sentiment was further lifted as US President Donald Trump announced on Tuesday an agreement between Washington and Beijing to keep TikTok operating in the United States.

Consumer-related shares showed a muted response after China on Tuesday unveiled measures to boost services consumption. (Reuters/Xinhua)