The AI market has been turned upside down: Morgan Stanley radically revises its view on Chinese AI stocks
Investment bank Morgan Stanley has made a decision that could reshape the balance of power in China's artificial intelligence market. Analysts raised the target price for shares of AI startup Zhipu by nearly 72%, triggering a powerful rally — the company's stock surged more than 37%, extending its winning streak to five consecutive weeks. This is not just a targeted adjustment, but a signal of a fundamental paradigm shift in the industry.
A New Era: From Price Wars to Intellectual Monetization
Analyst Gary Yu and his colleagues raised the target price for Zhipu shares, traded 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 — critical infrastructure for training and deploying models — as well as the successful completion of another funding round.
Just a few months ago, the dominant narrative for China's AI sector was the threat of a price war. It was believed that a multitude of open-source models would inevitably lead to their consolidation and a collapse in value. However, Morgan Stanley concluded that this logic no longer holds. "China's large AI model industry is forming healthier commercialization," Yu emphasizes.
In his assessment, the sector is transitioning "from price competition to monetization driven by model intelligence." Now, revenue is generated not by the cheapest model, but by the smartest one. If this trend takes hold, investors will have to radically rethink their approach to valuing the entire industry.
Context and Market Reaction
Zhipu, founded in 2019 and known for its GLM series of large language models, raised $4 billion this year in a secondary share placement in Hong Kong. This only underscores the growing investor appetite for Chinese AI projects, which throughout 2026 have been narrowing the gap with their Western counterparts.
In its report, the bank also mentioned two other companies. 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 also received a positive assessment: analysts highlighted its capabilities in end-to-end AI, its advantage in computing power, and the growing margins of its cloud business.
Against this backdrop, the Hang Seng Index opened up 0.53%, while the Hang Seng Tech rose 0.85%. Zhipu's five-week stock rally is a clear signal that the market is already betting on the new logic.
My view: Morgan Stanley's revision is an important marker of market maturity. Investors are tired of the race to the bottom and are beginning to pay for differentiation and a real intellectual product. However, it is worth remembering that high volatility in this sector is the norm, and such a rally could be followed by a correction. The key question is whether companies like Zhipu can turn the hype into sustainable financial performance.