Zhipu surges 37%: Morgan Stanley sees a new era of AI monetization in China
Morgan Stanley analysts have radically revised their view on China's artificial intelligence sector, raising the target price for AI startup Zhipu's shares by nearly 72%. This decision triggered a powerful rally: the company's stock soared by more than 37%, extending an impressive five-day winning streak.
The key driver of the revision was a change in the market's fundamental paradigm. Previously, the logic of a price war and the unification of open-source models dominated, putting pressure on valuations. Now, in my observation, the monetization of intelligence is taking center stage, rather than competition for the lowest price.
Analyst Gary Yu and his team raised the target price for Zhipu's Hong Kong-listed shares from 990 to 1,700 Hong Kong dollars (HKD). The reasons for this optimism include expanded access to computing resources for training and deploying models, as well as the successful completion of another funding round, which strengthens the company's balance sheet.
From a Price Race to Profits on Intelligence
Just a few months ago, the main threat to China's AI sector was considered to be competition among numerous open-source models, leading to their unification and a collapse in prices. However, Morgan Stanley emphasizes that this logic no longer holds. The sector is shifting from price competition to monetization driven by model intelligence. Revenue now comes not from the cheapest model, but from the smartest one.
Zhipu, founded in 2019 and known for its GLM series of large language models, has already raised $4 billion this year through a secondary share placement in Hong Kong. This reflects investors' high confidence in its strategy.
Throughout 2026, Chinese AI models have steadily narrowed the gap with their Western counterparts. This progress, combined with the new monetization strategy, is prompting a reassessment of valuations across the entire Hong Kong technology sector.
Cautious Optimism for MiniMax and Alibaba
The report also mentions other players. For MiniMax, experts maintained a "constructive" outlook but lowered the target price to 900 HKD, expecting the strongest growth at later stages. MiniMax shares rose by 4.8%. Alibaba also received a positive assessment thanks to its strong position in end-to-end AI, its advantage in computing power, and the growth of its cloud business margins.
The Hang Seng market index opened up 0.53%, while the Hang Seng Tech rose 0.85%, confirming the overall positive sentiment.
The five-day rally in Zhipu's shares is not just a speculative reaction. It is a signal that the market is beginning to believe in the ability of Chinese AI companies to turn their technologies into steady revenue. If this trend takes hold, we can expect a fundamental revaluation of the entire sector, and investors will have to seek new criteria for evaluating leaders.
My conclusion: the shift from a price war to monetization is the healthiest scenario for the industry. It separates companies with real technological value from those simply trying to undercut prices. Investors should closely watch how Zhipu and other leaders convert their models into profit.