The market is shifting priorities: Morgan Stanley sharply raises its valuation of Zhipu, shares soar 37%
China's artificial intelligence sector is undergoing a fundamental shift, and the market is beginning to price this in. My analysis shows that the recent revision of the target price for Zhipu — one of China's leading AI startups — has become the catalyst for a powerful rally: the company's shares surged more than 37%, continuing an impressive five-day winning streak. This is not just a speculative spike, but a signal of a changing investment paradigm.
The key decision — raising the target price for Zhipu shares on the Hong Kong Stock Exchange from 990 to 1,700 Hong Kong dollars (HKD), an increase of nearly 72%. The reasons for such optimism lie in operational efficiency: expanded access to computing resources for training and deploying models, as well as the successful completion of another funding round. This creates a solid foundation for scaling the business.
From price war to monetizing intelligence
Just a few months ago, the dominant narrative was a race to the bottom: competition among numerous open-source models was expected to lead to their consolidation and a collapse in prices. However, market logic has changed. China's large model industry is forming a healthier commercial model. The sector is shifting from price competition to monetization through model intelligence. Now, revenue comes not from the cheapest model, but from the smartest one.
This is confirmed by the dynamics of other players. MiniMax, mentioned in the same report, received a "constructive" outlook, although the target price was lowered to 900 HKD, indicating expectations of growth at later stages. MiniMax shares rose 4.8% during the day. 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. Against this backdrop, the Hang Seng and Hang Seng Tech indices opened up 0.53% and 0.85%, respectively.
My expert view: the revaluation of Zhipu is a wake-up call for investors who still assess Chinese AI companies using the old "race for cheapness" playbook. If the monetization trend takes hold, we will have to revise multiples for the entire industry. Zhipu's five-day stock rally is not just a reaction to the report, but a market bet that intelligence is becoming the primary commodity. Investors should closely watch companies' ability to turn their models into stable cash flow, rather than just a technological achievement.