Chinese artificial intelligence developer Zhipu AI is attracting renewed investor interest following a substantial rally in its Hong Kong-listed shares and a significant upward revision to its valuation outlook from Morgan Stanley.

Morgan Stanley raised its price target for Knowledge Atlas Technology, Zhipu AI's publicly traded entity, from HK$560 to HK$990 — a 77% increase that underscores growing institutional confidence in China's frontier AI sector.

AI Infrastructure Investments Fuel Optimism

The upgraded outlook aligns with Morgan Stanley's emphasis on improving model utilization, pricing power, and operational efficiency across China's AI industry. The investment bank anticipates that leading Chinese foundation model providers will capture surging demand as enterprises ramp up spending on AI inference and application deployment.

Zhipu has simultaneously bolstered its computing infrastructure. In July, the company's shares climbed 37% to HK$1,219 following reports that it had completed construction of a 1-gigawatt AI computing center powered exclusively by domestically produced Chinese chips. The facility is designed to support training and deployment of Zhipu's GLM model family. The reliance on domestic silicon is particularly significant given longstanding U.S. export controls on advanced AI accelerators, which have compelled Chinese developers to build out compute capacity using locally available alternatives.

The company also finalized its acquisition of XCore Sigma, a Chinese infrastructure software firm specializing in heterogeneous computing and AI inference technologies — a move aimed at optimizing performance across diverse chip architectures.

Zhipu Strengthens Competitive Position

Zhipu has positioned itself as one of China's most prominent AI model developers. Its GLM models operate in a competitive landscape that includes DeepSeek, MiniMax, and major technology incumbents. Chinese AI developers have drawn global attention in recent months for delivering model performance approaching Western frontier systems at notably lower inference costs, a dynamic that has reshaped expectations around the economics of large-scale AI deployment.

Morgan Stanley has identified China's engineering efficiency as a critical advantage, noting that domestic AI developers are increasingly prioritizing competitive model performance at reduced inference costs.

To fund its expansion, Zhipu completed an approximately $4 billion Hong Kong share sale in July, providing additional capital for research initiatives, computing infrastructure, talent acquisition, and strategic investments.

The rapid ascent in valuation does carry risks, however. Investors face the challenge of balancing Zhipu's accelerated growth trajectory against substantial AI infrastructure expenditures, intensifying market competition, and uncertainty around enterprise monetization timelines for foundation model providers.

For now, the convergence of expanded computing capacity, growing enterprise AI adoption, and favorable analyst projections has cemented Zhipu's position at the forefront of China's rapidly evolving AI investment landscape.