The AI market has been turned upside down: Morgan Stanley raised Zhipu's target by 72%, and the stock surged upward.
China's artificial intelligence sector is undergoing a tectonic shift. Morgan Stanley analysts have radically revised their view on AI startup Zhipu's stock, raising the target price by nearly 72% — from 990 to 1,700 Hong Kong dollars (HKD). This signal acted as a catalyst for a powerful rally: the company's shares surged more than 37%, extending the growth streak to five consecutive weeks.
The key thesis of the revision is a paradigm shift in the industry. Previously, the dominant fear was that competition among dozens of open models would lead to their homogenization and a collapse in prices. Now, as the bank's experts emphasize, this logic is outdated. China's large language model industry is forming a healthier commercial environment, moving from price wars to monetization based on the model's intellectual value. Simply put, it is not the cheapest model that wins, but the smartest one.
Zhipu's fundamental drivers
The target revision is backed by specific factors. First, the company has gained broader access to computing power — a critical resource for training and deploying models. Second, Zhipu has successfully completed a new funding round, raising $4 billion through a follow-on share placement in Hong Kong. Founded in 2019, the company is known for its GLM family of large language models and is currently at the forefront of the race for leadership.
Throughout 2026, Chinese AI models have been steadily narrowing the gap with their Western counterparts. Analysts now forecast a global revaluation of Hong Kong tech stocks amid the AI boom, and Zhipu is just the first swallow.
Caution in the details
However, the rally is not all-encompassing. For another AI company — MiniMax — experts maintained a "constructive" outlook but lowered the target price to 900 HKD, expecting the strongest growth at later stages. MiniMax shares gained a modest 4.8%. At the same time, the giant Alibaba also received a positive assessment, with analysts seeing strong positions in end-to-end AI and growth in cloud business margins.
The overall market dynamics are also positive: the Hang Seng Index opened up 0.53%, while the tech-focused Hang Seng Tech rose 0.85%.
My view: This revision is a powerful indicator of a shift in investment logic. The market no longer believes in a race to the bottom on pricing but is betting on those capable of turning AI into a stable cash flow. Zhipu's five-week rally is not a speculative bubble but a prelude to a fundamental revaluation of the entire sector. Investors who still assess Chinese AI companies by old templates should urgently reconsider their models.