Morgan Stanley sharply raises its target for Zhipu: shares soared 37%, and Chinese AI is changing the game rules.
Morgan Stanley analysts have radically revised their view on Chinese AI developer Zhipu, raising the target stock price by nearly 72%. This move triggered a powerful rally: the company's shares soared more than 37%, extending an impressive five-day winning streak. The bank is confident that China's artificial intelligence industry is finally moving away from a grueling price war.
My analysis confirms: we are witnessing a fundamental shift in the valuation of the entire sector. This is not just about revising numbers, but about a paradigm change—from competing on cheapness to competing on intelligence.
From a price race to monetizing intelligence
The team of analysts led by Gary Yu raised the target price for Zhipu shares on the Hong Kong Stock Exchange from 990 to 1,700 Hong Kong dollars (HKD). Key drivers of the revision were expanded access to computing resources—the critically important hardware base for training and running models—as well as the successful completion of another funding round.
Just a few months ago, the main threat to China's AI sector was considered to be the unification of open-source models and, as a result, a sharp drop in prices. Morgan Stanley now notes: this logic no longer works.
"China's large AI model industry is forming healthier commercialization," Yu emphasizes. The sector, he says, is transitioning "from price competition to monetization through model intelligence." Revenue now comes not from the cheapest model, but from the smartest one. If this trend takes hold, investors will have to completely rethink their approach to valuing the entire industry.
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 further confirms the market's strong appetite for players capable of converting AI developments into a real business. Throughout 2026, Chinese models have been steadily narrowing the gap with Western counterparts, and this process is clearly accelerating.
MiniMax and Alibaba: cautious optimism
In the report, the bank also touched on other key companies in the sector. For MiniMax, experts maintained a "constructive" outlook but lowered the target price to 900 HKD, expecting the greatest growth in later stages rather than in the near term. MiniMax shares rose 4.8% during the day.
Alibaba shares also received a positive assessment: analysts highlighted the company's opportunities in end-to-end AI, its advantage in computing power, and the growth of cloud business margins. Against this backdrop, the Hang Seng Index opened up 0.53%, while the Hang Seng Tech rose 0.85%.
If Morgan Stanley's monetization forecast proves correct, companies capable of turning AI models into stable income will sharply increase in value. Zhipu's five-day stock rally shows that the market is already betting on this.
My verdict: we are on the threshold of a new era in the valuation of AI companies. Investors who continue to think in terms of "cheap models" risk missing a wave of growth based on intellectual superiority and effective monetization. Zhipu is now the main benchmark of this transition.