Periodic/Sector reports
Internet: AI Model: Scaling Intelligence, Winning On Cost
MARKET WEIGHT (Maintained)
Analyst
Highlights
- China’s AI model market is entering a hyper-growth phase, driven by accelerating domestic enterprise adoption and growing consumer/SME demand overseas. We are bullish on leading Chinese AI labs that are supported by improving reasoning, easing compute constraints, and frontier R&D, while cost-effective open-weight models support overseas adoption.
Initiate coverage on Z. ai (2513 HK) and MiniMax (100 HK) with a BUY.
Analysis
- China’s AI model market is entering a hyper-growth phase, with accelerating domestic enterprise and international adoption powering the upside momentum. We forecast AI model application programming interface /subscription revenue growing from Rmb35b in 2026 to Rmb900b in 2030, with daily token consumption rising from 350T tokens to 4,500T (13x). Chinese models should increasingly gain traction in non-US markets as improving intelligence and lower token costs appeal to cost-sensitive SMEs and 24/7 autonomous-agent deployments.
- Chinese models are rapidly narrowing the performance gap with US peers while maintaining a structural cost advantage. Chinese developers are quickly catching up with US players across reasoning, coding and multimodal AI, with Kimi K3 slightly exceeding Anthropic Opus 4.8 on the Artificial Analysis Intelligence Index just seven weeks post-launch. China’s agent and coding token usage has rapidly reached 63% of global usage vs 32% a year ago ‒ evidence of fast global adoption.
- Inference efficiency and frontier R&D are increasingly becoming the key differentiators. Chinese foundation models have improved coding and agentic performance, with context windows expanding to 1m tokens. Chinese AI labs have significantly improved inference efficiency through efficient mixture of experts architectures, key-value cache optimisation, context compression, retrieval-augmented generation and advanced attention to cost control. We believe the talent, compute and R&D barriers should accelerate industry consolidation, while top models such as GLM-5, M3 and Kimi K3 highlight the fast shifts in model leadership.
- Initiate coverage on Z.AI Co (2513 HK/BUY/Target: HK$1,830.00) and MiniMax Group Inc (100 HK/BUY/Target: HK$470.00). We believe Z.ai remains well positioned with its research talent and we prefer Z.ai for its strong coding performance and better pricing power, while MiniMax stands out with its differentiated multimodal capabilities and superior cost efficiency.
Highlights
- China’s AI model market is entering a hyper-growth phase, driven by accelerating domestic enterprise adoption and growing consumer/SME demand overseas. We are bullish on leading Chinese AI labs that are supported by improving reasoning, easing compute constraints, and frontier R&D, while cost-effective open-weight models support overseas adoption.
Initiate coverage on Z. ai (2513 HK) and MiniMax (100 HK) with a BUY.
Analysis
- China’s AI model market is entering a hyper-growth phase, with accelerating domestic enterprise and international adoption powering the upside momentum. We forecast AI model application programming interface /subscription revenue growing from Rmb35b in 2026 to Rmb900b in 2030, with daily token consumption rising from 350T tokens to 4,500T (13x). Chinese models should increasingly gain traction in non-US markets as improving intelligence and lower token costs appeal to cost-sensitive SMEs and 24/7 autonomous-agent deployments.
- Chinese models are rapidly narrowing the performance gap with US peers while maintaining a structural cost advantage. Chinese developers are quickly catching up with US players across reasoning, coding and multimodal AI, with Kimi K3 slightly exceeding Anthropic Opus 4.8 on the Artificial Analysis Intelligence Index just seven weeks post-launch. China’s agent and coding token usage has rapidly reached 63% of global usage vs 32% a year ago ‒ evidence of fast global adoption.
- Inference efficiency and frontier R&D are increasingly becoming the key differentiators. Chinese foundation models have improved coding and agentic performance, with context windows expanding to 1m tokens. Chinese AI labs have significantly improved inference efficiency through efficient mixture of experts architectures, key-value cache optimisation, context compression, retrieval-augmented generation and advanced attention to cost control. We believe the talent, compute and R&D barriers should accelerate industry consolidation, while top models such as GLM-5, M3 and Kimi K3 highlight the fast shifts in model leadership.
- Initiate coverage on Z.AI Co (2513 HK/BUY/Target: HK$1,830.00) and MiniMax Group Inc (100 HK/BUY/Target: HK$470.00). We believe Z.ai remains well positioned with its research talent and we prefer Z.ai for its strong coding performance and better pricing power, while MiniMax stands out with its differentiated multimodal capabilities and superior cost efficiency.
MARKET WEIGHT (Maintained)
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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