Morgan Stanley raises Zhipu's target price by 72%: Chinese AI shifts from price wars to a battle for intelligence
Morgan Stanley analysts have radically revised their view on China's artificial intelligence sector, raising the target price for AI startup Zhipu's shares by nearly 72%. The market instantly reacted with a surge in quotes of more than 37%, extending an impressive five-day rally.
In my analysis, this is not just another target price adjustment. It is a signal of a fundamental shift in how institutional investors value Chinese AI companies. This is about moving from competing on low price to monetizing intellectual superiority.
A New Valuation Paradigm
The analyst team led by Gary Yu raised the target price for Zhipu's Hong Kong listings from 990 to 1,700 Hong Kong dollars (HKD). Key drivers of the revision were expanded access to computing resources—a critically important asset for training and deploying models—as well as the successful completion of another funding round.
Just a few months ago, the dominant narrative was the threat of open-source model commoditization, which was expected to collapse prices. Now that logic is outdated. China's large model industry is forming a healthier commercial model, where revenue comes not from the cheapest but from the smartest model. If this trend takes hold, investors will have to completely reassess the entire industry.
Divergence in the Sector
Notably, the bank is not distributing optimism equally to everyone. For MiniMax, experts maintained a "constructive" outlook but lowered the target price to 900 HKD, expecting the main growth in later stages rather than in the near term. Meanwhile, MiniMax shares gained 4.8% during the day.
Alibaba also received a positive assessment thanks to its capabilities in end-to-end AI, its advantage in computing power, and the growth of its cloud business margins. Against this backdrop, the Hang Seng Index opened up 0.53%, while the Hang Seng Tech rose 0.85%.
Analyst's View
Zhipu, founded in 2019 and known for its series of GLM large language models, has already raised $4 billion in a follow-on share placement in Hong Kong this year. The five-day stock rally following the forecast revision is not just a speculative reaction but a sign that the market is beginning to bet on a new valuation model. In my understanding, we are witnessing the start of a structural revaluation of the entire Chinese AI sector, and those companies that can turn intellectual developments into stable cash flow will find themselves in the spotlight of global investors.
However, caution should be maintained: with such aggressive growth in quotes, a correction is possible in the short term, and investors should closely monitor quarterly monetization metrics before making long-term bets.