Two leading Chinese artificial intelligence companies made their stock market debuts in Hong Kong this week in what analysts describe as a critical test of investor appetite for the country’s rapidly expanding AI sector, despite questions about when—or whether—such firms can achieve profitability.
Zhipu AI, which operates the Z.ai tool, saw shares rally as much as 11.8% in early trading Thursday after its oversubscribed initial public offering raised HK$4.35 billion ($558 million). Rival MiniMax is scheduled to list Friday, making them the first two of China’s “six tigers”—generative AI providers competing with tech giants including Alibaba and ByteDance—to go public.
Market Significance
The listings come ahead of any IPO announcements from top US startups OpenAI, maker of ChatGPT, and Anthropic, known for its Claude chatbot, potentially giving Chinese firms a first-mover advantage in public markets.
“Zhipu is honoured to stand at this historic juncture as a representative of China’s large model sector,” company chairman Liu Debing said at Thursday’s listing ceremony.
However, multiple industry experts interviewed by AFP cautioned that profitability remains distant for both companies, raising questions about long-term sustainability despite strong initial investor demand.
Company Profiles and Strategies
Zhipu AI, founded in 2019, is a major provider of large language model (LLM) services to businesses and government clients in the world’s second-largest economy. The company, backed by conglomerate Tencent, stated that IPO proceeds will fund development of general-purpose large AI models, including key algorithms and system infrastructure.
MiniMax, established in 2022, targets the consumer market, particularly outside China, with generative AI tools for speech, music, video, and text.
Expert Analysis: Revenue Potential vs. Fundamental Challenges
Poe Zhao, founder of the Hello China Tech newsletter and a China tech analyst, told AFP that the two IPOs “demonstrate both the revenue potential and the fundamental challenges facing this new generation of LLM companies.”
“The high demand definitely reflects broader optimism about Chinese AI,” Zhao said, though he emphasized concerns about market sustainability.
“Do I think there’s a bubble? Yes. But I want to distinguish between ‘bubble’ and ‘bubble risk’. These companies need capital intensity,” he explained.
Zhao said he does not expect Zhipu or MiniMax to become profitable “any time soon.”
“That depends on two industry-wide shifts: significantly lower computing costs and much larger AI demand to spread those costs across,” he said.
Profitability Timeline Uncertain
Shengyun Lu, founder of LSY Consulting, provided additional context on the financial challenges facing foundational model companies.
“To run a foundational model company, it costs a lot and takes a lot of time,” Lu cautioned. “IPOs allow the companies to raise money for financing their future research activities, but on the other hand, the initial investors are seeking an exit.”
Market Potential and Geopolitical Headwinds
The LLM market in China is estimated to reach 101.1 billion yuan ($14.5 billion) by 2030, according to consultancy Frost and Sullivan.
However, both companies face significant geopolitical and legal challenges. In January 2024, Washington placed Zhipu on its export control blacklist over national security concerns. MiniMax faces copyright infringement lawsuits from Disney and other US entertainment companies including Universal.
Broader Industry Context
The listings occur as China’s AI sector gains momentum following DeepSeek’s January 2025 launch of a low-cost, high-performance reasoning model that challenged assumptions of US dominance in AI development.
Beijing has reportedly encouraged tech firms to use domestically produced microchips due to Washington’s restrictions on high-end Nvidia chips used to train and run AI systems. Investor confidence in China’s semiconductor industry recently sent shares in chip companies Moore Threads and MetaX soaring on their market debuts last month.
Earlier this month, Baidu, operator of China’s top search engine, announced that its AI chip unit Kunlunxin filed a listing application in Hong Kong, signaling continued momentum in the sector.
Volatility Concerns
An AI boom has pushed tech stocks to record highs in recent months, though the sector remains volatile as global investors watch for signs of a potential bubble. The strong initial performance of Zhipu AI’s shares suggests continued market enthusiasm for Chinese AI companies despite ongoing questions about business model sustainability and path to profitability.
The coming months will test whether investor appetite for Chinese AI companies can withstand the sector’s high capital requirements, uncertain revenue models, and complex geopolitical environment.
