The AI market has turned around: Morgan Stanley radically raises its valuation of Zhipu, shares soar 37%
China's artificial intelligence sector is undergoing a paradigm shift. Leading investment bank Morgan Stanley has raised its target price for AI startup Zhipu's shares by nearly 72%, triggering a powerful market rally. The company's stock surged more than 37% in a single day, extending an impressive five-day winning streak.
Analysts led by Gary Yu raised the target price for Zhipu shares traded on the Hong Kong Stock Exchange from 990 to 1,700 Hong Kong dollars (HKD). Key drivers of the revision included expanded access to computing resources—a critical factor for training and deploying models—as well as the successful completion of the company's latest funding round.
From Price War to Monetizing Intelligence
Just a few months ago, the main threat to Chinese AI companies was seen as fierce competition among numerous open-source models, which was expected to lead to consolidation and a price collapse. Morgan Stanley has concluded that this logic no longer holds.
"China's large AI model industry is forming healthier commercialization," Yu emphasized. According to him, the sector is transitioning "from price competition to monetization driven by model intelligence." Revenue now comes not from the cheapest model but from the smartest one. If this trend takes hold, investors will need to reassess the entire industry.
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 signals strong investor confidence in the company's business model.
MiniMax and Alibaba: Divergent Dynamics
In the report, the bank also addressed other key companies in the sector. For MiniMax, analysts maintained a "constructive" outlook but lowered the target price to 900 HKD, expecting the strongest growth in later stages rather than the near term. MiniMax shares rose 4.8% during the day.
Alibaba also received a positive assessment: analysts highlighted the company's opportunities 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%.
Zhipu's five-day stock rally is a clear signal: the market is already betting on a new reality where value is determined by intelligence, not price. My take: Morgan Stanley's revaluation is not just a numbers adjustment but a recognition of a fundamental shift in the AI economy. Companies capable of monetizing their models will become the main beneficiaries of this transformation, and Zhipu currently looks like one of the strongest candidates.