HONG KONG, Feb 14 (Reuters) - Chinese tech stocks

resumed their bullish rally on Friday, heading towards their

best winning streak in over two years, driven by DeepSeek's AI

breakthrough that reignited investor interest in China's

technology capabilities.

The Hang Seng Tech Index jumped 3.1% to a

three-year high at the midday break, bringing the week's advance

to 4.8%. That puts it on track to post the fifth consecutive

week of gains, the best winning run since China's post-COVID

reopening trade started in late 2022.

Alibaba ( BABA ) jumped 2.7% to a fresh three-year high,

after company chairman Joe Tsai on Thursday confirmed it will be

working with Apple ( AAPL ) on AI service offerings for iPhones

in China. Alibaba Health surged more than 16%.

The Hang Seng Index tracking the broader market in Hong Kong

advanced 2.2% to near its October high.

Mainland stocks also edged up, with the blue-chip CSI300

Index and the Shanghai Composite Index both

gaining 0.7% by lunch break.

"Global investors are starting to reassess China's

investibility within the tech and AI space, after an extended

period of limited attention, which could still lead to a

recovery of positioning with thorough fundamental research done

at the individual company level," Morgan Stanley strategists

including Laura Wang said in a note on Friday.

The launch of DeepSeek's high-performing and inexpensive

large language model has sparked a strong inflow into AI-related

stocks since the Lunar New Year, driving a re-valuation in the

sector.

The Hang Seng Tech Index has surged more than 60% since the

September trough, while the benchmark Hang Seng Index has

advanced 11.2% this year to rank as the best performer in Asia's

major markets after years of lagging.

Near-term headwinds are emerging for the AI theme with

crowded trading and stretched valuations, analysts at HSBC

Qianhai Securities said in a note.

However, tech companies still have sufficient upside for a

re-rating as the stock market has yet to reflect China's

improving innovation capability from a long-term perspective,

they said.

Also aiding sentiment, U.S. President Donald Trump's

proposed reciprocal tariffs were not immediately imposed, which

eased concerns of an imminent global trade war.

Around the region, the MSCI's broadest index of Asia-Pacific

shares outside Japan was up 0.54%, hovering near

the two-month high it touched on Thursday. Japan's Nikkei

fell 0.55% but was on track to eke out gains for the

week.