A turning point for Chinese AI: Morgan Stanley sharply raises its valuation of Zhipu
China's artificial intelligence sector is undergoing a fundamental transformation, and the market is beginning to realize this. Morgan Stanley analysts' decision to raise the target price for Zhipu shares by nearly 72% — from 990 to 1700 Hong Kong dollars (HKD) — has become a powerful catalyst. The company's stock price reacted immediately, extending a five-day rally and gaining more than 37%. This is not just a forecast adjustment, but a signal of a paradigm shift in how the entire industry is valued.
From Price War to Intellectual Monetization
Until recently, the dominant narrative was a race to the bottom: it was believed that a multitude of open models would lead to their consolidation and a collapse in prices. However, the logic that the cheapest model wins is outdated. The sector is shifting from price competition to the monetization of intelligence. Now, revenue is generated not by the most affordable model, but by the "smartest" one capable of solving complex tasks.
The key drivers behind the revision of Zhipu's valuation were expanded access to computing resources (a critically important factor for training and deploying models) and the successful completion of another funding round. Recall that the company, 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 speaks to investor confidence in the company's long-term strategy.
Significantly, other players also received positive assessments. For MiniMax, analysts maintained a "constructive" outlook, although they lowered the target price to 900 HKD, expecting the greatest growth at later stages. MiniMax shares gained 4.8% during the day. Alibaba shares also received a positive assessment thanks to its strong position in end-to-end AI, advantages in computing power, and growing cloud business margins. Against this backdrop, the Hang Seng and Hang Seng Tech indices rose by 0.53% and 0.85%, respectively.
My view: we are witnessing the beginning of a revaluation of the entire Chinese technology sector. Investors who, just yesterday, priced in only price competition, today are forced to account for intellectual potential and the ability of companies to turn models into stable revenue. Zhipu's five-day rally is just the first step. If the trend toward monetizing intelligence takes hold, we can expect a wave of valuation revisions for other public AI companies in China as well. The only question is which of them can prove to the market their ability to generate sustainable profits, rather than just technological leadership.