Morgan Stanley sharply raises its target price for Zhipu: from price wars to a battle of intelligence
Morgan Stanley analysts have revised their view on China's AI sector, raising the target price for Zhipu shares by nearly 72%. This move has not only triggered a powerful 37% rally over the last five trading sessions but also signals a fundamental shift in how the market values Chinese artificial intelligence technology.
The key change is a transition from competing on low price to competing on model quality. The previously dominant narrative that a multitude of open-source models would lead to their commoditization and a price collapse no longer holds. Now, as I see it, the market is starting to pay for intelligence, not for cheapness.
New target and growth drivers
The target price on the Hong Kong Stock Exchange has been raised from 990 to 1,700 Hong Kong dollars (HKD). This optimism is backed by two key factors: expanded access to computing resources for training and launching models, as well as the successful completion of another funding round. This removes the main operational risks that had been holding back the company's valuation.
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 provides it with a solid financial cushion for scaling.
The broader sector: MiniMax and Alibaba
The report also mentions other players. For MiniMax, analysts 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% for the day. Alibaba also received a positive assessment thanks to its capabilities in end-to-end AI, advantages in computing power, and growth in cloud business margins.
Against this backdrop, the Hang Seng Index opened up 0.53%, while the Hang Seng Tech Index rose 0.85%, confirming the overall positive sentiment among investors toward China's technology sector.
My view: This revision is not just an adjustment of numbers but a sign of market maturity. Investors should stop viewing Chinese AI companies as a single pool of cheap alternatives and begin distinguishing them by their ability to monetize models. Zhipu's five-day rally is just the beginning; if the monetization trend takes hold, we will witness a significant revaluation of the entire sector, and those who can turn AI models into stable income will become the new market leaders.