China’s blue-chip CSI300 Index advanced 0.7% by the lunch break, and the Shanghai Composite Index gained 0.3%.

Hong Kong benchmark Hang Seng was largely flat. The Hang Seng Tech rose 0.6%.

The State Council released an “AI Plus” initiative on late Tuesday to bolster the application of AI in different areas such as technology and consumption.

AI, cloud computing and semiconductor shares rallied broadly on the back of policy stimulus.

CSI AI Index jumped 5.5% by midday, hitting a record high. Semiconductor stocks gained 4%.

“This development represents a powerful catalyst for growth stocks and related subsectors,” investment manager KraneShares said in a note.

Shares of Cambricon Technologies jumped over 8% to another record high after the AI chip maker swung to profit in the first half.

Meanwhile, broader economy remains challenging. Official data shows China’s industrial profits fell for a third consecutive month in July on demand and deflation woes.

“The lifespan of this equity rally remains uncertain,” analysts at UBS Global Wealth Management CIO said in a note.

Given the deteriorating macro conditions, investors may shift focus to the Fourth Plenary in October, awaiting new measures to support the economy.

The smaller Shenzhen index was up 0.8%, the start-up board ChiNext Composite index was higher by 2.41% and Shanghai’s tech-focused STAR50 index was up 4.16%​.

The rise in China stocks was also helped by the currency strength.

China’s yuan briefly hit its highest in nearly 10 months against the dollar today, thanks to strong guidance fix and weaker dollar.