By Jiaxing Li

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 .HSTECH 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 9988.HK jumped 2.7% to a fresh three-year high, after company chairman Joe Tsai on Thursday confirmed it will be working with Apple AAPL.O 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 .CSI300 and the Shanghai Composite Index .SSEC 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 .MIAPJ0000PUS was up 0.54%, hovering near the two-month high it touched on Thursday. Japan's Nikkei .N225 fell 0.55% but was on track to eke out gains for the week.

(Reporting by Jiaxing Li in Hong Kong; Editing by Sonali Paul)

((jiaxing.li@tr.com +852 63358304))