Zhipu AI Stock Soars 9% as China's AI Price War Heats Up

Shares of Chinese artificial intelligence developers rallied on Monday, with Zhipu AI climbing 9 percent to a new high, as investors reassessed a vicious price war as a catalyst for market consolidation rather than a drag on margins.

The rally marks a sharp reversal from just two months ago and suggests investors are growing more selective, favoring companies seen as potential long-term winners in a market heavily influenced by Beijing’s push for technological self-reliance. The market has not fully priced in the impact of policy support on the profitability of these tech stocks, according to fund managers cited in recent reports.

Zhipu AI, a prominent developer of large language models, saw its stock surge 9 percent to close above HK$1400 in afternoon trading in Hong Kong. Rival MiniMax jumped more than 7 percent on the same day. The move contrasts sharply with early April, when the launch of a new, aggressively priced model from competitor DeepSeek sent Zhipu and MiniMax shares tumbling by 8 to 9 percent.

The gains signal a shift in investor thinking, from fearing margin erosion to betting that a price war will accelerate the emergence of a few dominant players. This comes as investment flows into China’s AI supply chain—from semiconductors to software—even as the broader consumer economy slows, creating what one analyst called a "very, very uneven" market.

A Price War of Attrition

The backdrop to the rally is one of the most aggressive AI price wars globally. Last week, Hangzhou-based startup DeepSeek made a 75 percent discount on its flagship V4-Pro model permanent, just a month after its launch. The move solidifies its API output token price at just $0.87 per million tokens.

This pricing dramatically undercuts Western competitors. For the same workload, OpenAI’s GPT-5.5 is nearly 35 times more expensive at around $30 per million tokens, while Anthropic’s Claude Opus 4.7 costs about $25. The cost structure is a direct challenge to established players and makes a new category of AI agent applications economically feasible on Chinese platforms. While DeepSeek’s move initially spooked investors, the market now appears to view it as a decisive feature of the competitive landscape, forcing a race to scale where only the most efficient and well-capitalized firms can survive.

Tech Self-Reliance Fuels Investor Interest

The intense competition is playing out amid a broader government mandate for technological self-reliance. This national priority has funneled capital into domestic hardware and software firms, supporting their valuations even as other sectors of the economy struggle. The trend is reflected in the divergence between mainland and Hong Kong markets; the tech-heavy CSI300 index is up nearly 5 percent this year, while the broader Hang Seng Index is little changed.

This policy-driven investment thesis is leading to increasingly selective bets. Morgan Stanley, for instance, recently gave overweight calls on Zhipu AI, MiniMax, and Alibaba, signaling confidence in their ability to navigate the competitive environment. As the price war makes AI services more accessible, the focus for investors is now shifting to which companies can demonstrate genuine customer retention and build sustainable business models on top of low-cost inference.

This article is for informational purposes only and does not constitute investment advice.