The “AI fright trade” has taken over US markets, with investors selling wealth managers and software companies out of fear that the quick development of AI could undermine long-standing business models.
The atmosphere is much more positive in China. Investors are pursuing perceived winners rather than fretting about disruption because of AI’s growth potential and ability to lower end-user costs. Investors like local businesses that have improved their current models or introduced new ones.
The most prominent examples are MiniMax Group Inc. and Knowledge Atlas Technology JSC Ltd., also referred to as Zhipu, whose stock prices more than doubled in February. As pure AI plays draw investors away from established Internet behemoths, optimistic ratings from Wall Street banks, such as Morgan Stanley, are bolstering the optimism.
The market is currently concentrating on what AI may help rather than what it can take away from incumbents, therefore China has been comparatively immune to the AI fright trade, according to Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “China is still about penetration, whereas the US is worried about rich profit pools being eroded by competition.”
China’s largely insulated competitive ecosystem, where legislative restrictions and geopolitical concerns hinder overseas engagement by AI-related enterprises, is a major factor contributing to the gap in investor concentration.
According to Gary Tan, a portfolio manager at Allspring Global Investments in Singapore, “the difference between China market participants and global investors illustrates how structurally unique China’s AI landscape is.” Due to their limited access to the domestic market, foreign large language models “give local model makers a clear run.”
The lack of listed international companies that construct LLMs is another reason why investors are favoring MiniMax and Zhipu. Since their January Hong Kong debuts, Zhipu’s stock has increased by 524%, while MiniMax’s stock has increased by 488%. Two industry leaders, OpenAI Inc. and Anthropic, are not on the list.
The rise has also positively impacted other recently launched Chinese AI-related stocks. The stock of chip designers Shanghai Biren Technology Co. has increased by almost 80% since becoming public on January 2nd, and Montage Technology Co. has had a more than 98% increase since going public on February 9th.
With new private funding rounds for the two pioneers pointing to ever-rising valuations, the Chinese companies are also enjoying a halo effect. Anthropic raised $30 billion earlier this month at a valuation of $380 billion, while OpenAI is on the verge of raising over $100 billion in new funds at a valuation that could surpass $850 billion.
In a Feb. 13 report, analysts at Jefferies Financial Group Inc., including Edison Lee, stated that the fundraising figures and new models have contributed to a re-rating. “China AI valuations have upside potential.”
Some market observers warn that if profits growth does not match investor confidence, the re-rating would be hard to maintain. Additionally, investors may be ignoring a more painful truth by concentrating on AI champions: disruptive threats that could affect multiple industries and lower corporate profits in the wider market.
However, for the time being, Chinese investors see every new advancement in AI as a stimulus for both the creators and the users of the new technologies. Film and media stocks increased after ByteDance, the owner of TikTok, released a video-making app.
Zhipu just launched GLM-5, the most recent version of its LLM. That took the top spot among open-source models globally on benchmarking site Artificial Analysis, surpassing a competing product from Moonshot AI that was only introduced a few weeks ago. The Jefferies note reads, “That is the highest ranking a Chinese AI lab has ever earned.”
DeepSeek, the startup that ignited a global craze over China’s rapidly expanding AI business, is partly responsible for the hype. The industry as a whole might benefit from the company’s anticipated next-generation model release.
China’s AI model performance rating has reached an all-time high thanks to Zhipu’s GLM-5 performance. Users may embrace Chinese AI models, like DeepSeek’s, more quickly due to their cost-competitiveness.
With buy-equivalent ratings, Morgan Stanley, Jefferies, and UBS Group AG have begun to cover MiniMax. According to Morgan Stanley, the company’s sales might expand by up to ten times over the following two years, reaching almost $700 million by 2027.
Billy Leung, an investment strategist at Global X Management, stated, “The Morgan Stanley initiation on MiniMax with highly aggressive revenue expectations has supported that narrative, and recent China AI model releases have revived interest in foundation model leaders.” “While diversified platforms like Alibaba and Tencent are experiencing some profit taking, money is shifting into pure AI names.”
