Morgan Stanley sharply raises target for Zhipu: betting on intelligence rather than price wars
Key signal for the entire Chinese AI sector: analysts at one of Wall Street's largest investment banks have revised their view on Zhipu shares, raising the target price by nearly 72%. The market reacted instantly—the company's stock continued its steady climb, gaining more than 37% in a single day and extending its winning streak to five consecutive weeks. This is not just a forecast adjustment, but a paradigm shift in how the entire industry is valued.
In the new valuation model, the target price for Zhipu's Hong Kong-listed receipts has been raised from 990 to 1,700 Hong Kong dollars (HKD). The bank's experts attribute this to two key factors: significantly expanded access to computing power for training and launching models, as well as the successful completion of another major funding round. These factors, in my view, create a solid foundation for scaling the business in the coming quarters.
Just a few months ago, the dominant narrative was the threat of a "price war": it was believed that a multitude of open models would lead to their homogenization and a collapse in value. Now, that scenario is considered outdated. Analysts emphasize that China's large language model industry is forming a healthier commercial environment. The sector is shifting from competing on the lowest price to monetizing through intellectual superiority. Revenue now comes not from the cheapest model, but from the smartest one.
Changing benchmarks: from a price race to an intelligence race
This is a fundamental shift. If investors previously valued companies by their ability to undercut prices, the focus now is on the ability to turn AI models into a stable cash flow. Zhipu, founded in 2019 and known for its GLM series of models, has already raised $4 billion in a follow-on share placement in Hong Kong this year, confirming market confidence in the new strategy.
The bank's report also mentions other players. For MiniMax, a "constructive" outlook has been maintained, but the target price has been lowered to 900 HKD—analysts expect peak growth at later stages, rather than in the near term. MiniMax shares rose 4.8% in a day. Alibaba also received a positive assessment, with strong positions in end-to-end AI, an advantage in computing power, and growing cloud business margins highlighted.
Against this backdrop, the Hang Seng and Hang Seng Tech indices opened up 0.53% and 0.85%, respectively. Zhipu's five-week stock rally is a clear market bet that the monetization forecast will pay off. If this trend holds, investors will have to completely rethink their approach to valuing the entire Chinese technology sector.
My comment: The shift from price competition to competition for intelligence is a sign of market maturation. I expect that in the coming months we will see a wave of revaluation not only of Zhipu, but also of other Chinese AI companies capable of demonstrating real monetization of their models. This will create new opportunities, but will also require deeper analysis of fundamental metrics, rather than simply following the hype.