The AI market has turned around: Zhipu's target price soared by 72%, and its stock rose by 37%.
Investment bank Morgan Stanley has radically revised its view on China's artificial intelligence sector, raising the target price for AI startup Zhipu's shares by nearly 72%. The market reacted instantly: the company's stock showed confident growth of more than 37%, extending an impressive five-day rally.
In my analysis of this situation, the key signal is not just a number in the report, but a fundamental shift in the valuation of the entire industry. Analysts led by Gary Yu raised the target price for Zhipu shares, traded on the Hong Kong Stock Exchange, from 990 to 1,700 Hong Kong dollars. Such an aggressive revision is based on two key factors: a significant expansion of access to computing resources needed for training and deploying models, as well as the successful completion of another funding round.
From price war to battle for intelligence
Just a few months ago, the dominant narrative in the market was the threat of a "price war"—competition among numerous open-source models, which was expected to lead to their consolidation and a collapse in prices. Now, as I see it, this logic is completely outdated. China's large model industry is forming a much healthier commercial model, shifting from simple competition for low prices to monetization driven by the superiority of the model's intelligence itself.
Revenue is now generated not by the cheapest model, but by the smartest one. This is a crucial signal for investors: if the trend takes hold, the valuation of the entire industry will have to be recalculated from scratch, abandoning old multiples in favor of metrics that reflect the real efficiency and monetization of AI assets.
MiniMax and Alibaba: different fates
In the same report, the bank also mentioned other companies. For MiniMax, experts maintained a "constructive" outlook but lowered the target price to 900 Hong Kong dollars, expecting the company's main growth to come at later stages rather than in the near future. MiniMax shares rose 4.8% during the day.
Alibaba shares also received a positive assessment: analysts highlighted its capabilities in end-to-end AI, its advantage in computing power, and the growth of its cloud business margins. Hong Kong stock indices also reacted positively: the Hang Seng opened up 0.53%, while the Hang Seng Tech rose 0.85%.
Zhipu, founded in 2019 and known for its series of large language models GLM, has already raised $4 billion this year through a secondary share placement in Hong Kong. The fact that the company's shares rose 37% in five days suggests that the market is already betting on this new paradigm.
My verdict: Morgan Stanley's revised assessment is not just a targeted forecast for one company, but a marker of a changing era. Chinese AI developers are moving from the "race for scale" phase to the "race for profit" phase. Investors tracking this sector should shift their focus from metrics reflecting raw power to metrics demonstrating the ability to turn algorithms into sustainable cash flow. This will change the rules of the game for all market players.