China's AI market is unfolding: Morgan Stanley raises its target for Zhipu by 72%, shares soar 37%
China's artificial intelligence sector is undergoing a fundamental shift, and the market is already beginning to price this in. Following a revision of the target price for shares of AI startup Zhipu, the company's stock demonstrated impressive growth, extending a five-day rally and gaining more than 37% over that period. Analysts raised the projected value by nearly 72%, signaling a paradigm shift in the valuation of the entire industry.
In the updated analytical note I reviewed, the target price for Zhipu shares on the Hong Kong Stock Exchange was raised from 990 to 1,700 Hong Kong dollars (HKD). Key drivers of the revision included expanded access to computing resources for training and launching models, as well as the successful completion of another funding round. This is not just a targeted adjustment—it is a rethinking of the market's very logic.
Just a few months ago, the dominant narrative was a "price war": it was believed that competition among numerous open models would lead to their homogenization and a collapse in prices. That logic no longer holds. China's large model industry is forming a healthier commercial model, shifting from competing on low price to monetizing the intelligence of the model itself. Simply put, revenue comes not from the cheapest model, but from the smartest one.
Shifting benchmarks: from price to intelligence
This transition has profound implications for investors. If the trend takes hold, the entire industry will need to be valued anew. Zhipu, founded in 2019 and known for its GLM series of large language models, raised $4 billion this year in a follow-on share placement in Hong Kong. The company is at the forefront of this process, and its shares are already reflecting new expectations.
Notably, in the same report, analysts maintained a "constructive" outlook on MiniMax but lowered the target price to 900 HKD, expecting the greatest growth at later stages. MiniMax shares rose 4.8% on the day, while Alibaba's stock also received a positive assessment due to its capabilities 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%.
The five-day rally in Zhipu shares is not merely a speculative reaction to a single report. It is a signal that the market is beginning to bet on companies capable of turning AI models into stable revenue, rather than just a technological achievement. Investors should closely monitor how this trend develops over the coming quarters.
My analysis: The shift from price competition to monetizing intelligence is a mature and inevitable stage in the development of any technology sector. However, it is worth remembering that assessing a model's "intelligence" is a highly subjective task, and the market may overreach in its expectations. Investors should diversify risks and not lose sight of fundamental metrics, such as real revenue growth and margins, rather than just flashy headlines.