Zhipu's target price soared by 72%: the market shifts from price wars to intelligence
Morgan Stanley analysts have radically revised their view on China's AI sector, raising the target price for startup Zhipu's shares by nearly 72%. This decision triggered a powerful rally: the company's stock soared by more than 37%, extending an impressive five-day winning streak. It seems the era of price dumping in China is fading into the past, giving way to a new paradigm—a battle for intelligence, not price.
In the updated report, which I carefully reviewed, analyst Gary Yu's team raised the target price for Zhipu's Hong Kong-listed shares from 990 to 1,700 Hong Kong dollars (HKD). Key drivers of this optimism included expanded access to computing resources—a critically important asset for training and deploying models—as well as the successful completion of another funding round, which strengthened the company's balance sheet.
Paradigm Shift: From Race to the Bottom to Monetization
Just a few months ago, the main risk for China's AI sector was considered to be fierce competition among numerous open models, which would inevitably lead to their consolidation and a collapse in prices. Morgan Stanley now confidently states that this logic no longer holds. The sector is transitioning from price competition to monetization driven by model intelligence. Revenue will come not from the cheapest model, but from the smartest one.
This is a fundamental shift. Investors will have to completely reassess the entire industry if this trend takes hold. Zhipu, founded in 2019 and known for its GLM series of large language models, has already raised $4 billion in a follow-on share offering in Hong Kong this year. This only confirms the market's growing appetite for players capable of converting AI developments into real profits.
MiniMax and Alibaba: Divergent Assessments
The report also mentions other key players. For MiniMax, experts maintained a "constructive" outlook but lowered the target price to 900 HKD, expecting the company's greatest growth in later stages rather than in the near term. Meanwhile, MiniMax shares rose 4.8% during the day. At the same time, Alibaba's shares received a positive assessment thanks to its end-to-end AI capabilities, advantages in computing power, and margin growth in its cloud business. The Hang Seng index itself opened up 0.53%, while Hang Seng Tech gained 0.85%.
My view: The target price hike for Zhipu is not just a targeted signal for one company, but a powerful indicator of a shift in China's investment landscape. The market is beginning to pay for intellectual property and the ability to monetize, rather than for scale and low cost. The five-day stock rally is just the initial reaction; if monetization forecasts prove accurate, we will witness a much larger revaluation of the entire Chinese tech sector. Investors should closely monitor companies' ability to turn their models into stable cash flow.