The AI market is unfolding: Morgan Stanley radically raises its forecast for Zhipu, shares soar 37%
Morgan Stanley analysts have radically revised their view on China's artificial intelligence sector, raising the target price for Zhipu shares by nearly 72%. This move not only triggered a five-day rally in which the company's shares gained more than 37%, but also signals a fundamental shift in how the entire industry is valued.
In my analysis, this is not just another target price hike. It is a clear signal that the investment bank sees a paradigm shift: China's AI industry is moving away from a destructive price war toward healthy commercialization. The analyst team led by Gary Yu raised Zhipu's target price on the Hong Kong Stock Exchange from 990 to 1,700 Hong Kong dollars (HKD), implying significant upside even after the impressive rally.
The key drivers of the revision were two factors: expanded access to computing resources (the hardware base for training and running models) and the successful completion of a new funding round. In my view, these elements remove the main operational risks that had previously constrained the company's valuation.
From a price race to monetizing intelligence
Just a few months ago, the dominant narrative in the market was the threat of open-model commoditization and a collapse in AI service prices. However, the logic I am observing now completely refutes that thesis. As experts emphasize, China's large-model industry is forming a healthier commercial environment. We are moving from competing by lowering prices to monetizing through model intelligence.
This means that revenue is now generated not by the cheapest model, but by the smartest one. If this trend takes hold, investors will have to completely rethink their approach to valuing the entire industry, focusing not on operational efficiency but on intellectual superiority and the ability to convert it into stable profits.
Zhipu, founded in 2019 and known for its GLM series of large language models, has already raised $4 billion this year in a follow-on share placement in Hong Kong. This underscores the strong appetite of investors for companies capable of competing on equal footing with Western counterparts, which have been narrowing the technology gap throughout 2026.
MiniMax: a cautious assessment
Unlike Zhipu, experts maintained a "constructive" outlook on MiniMax but lowered the target price to 900 HKD. Analysts expect the company's biggest growth in later stages rather than in the near future. Nevertheless, MiniMax shares responded with a 4.8% gain, and Alibaba shares also received a positive assessment thanks to strong positions in end-to-end AI, an advantage in computing power, and growth in cloud business margins.
The market context is also positive: the Hang Seng Index opened up 0.53%, while the Hang Seng Tech rose 0.85%. The five-day rally in Zhipu shares is not just a speculative reaction. It is the market betting that the forecast of a shift toward monetizing intelligence will prove correct, and companies capable of converting their models into sustainable revenue will be sharply revalued upward.
My verdict: The Morgan Stanley revision is an important marker for the entire market. It confirms that the "race to the bottom" phase in Chinese AI is over. Now investors should focus on fundamental monetization metrics rather than hype around new models. Zhipu looks like a beneficiary of this trend, but I would closely watch the company's ability to maintain technological leadership, which will be the main driver of value in the new reality.