Bernstein Initiates Coverage on Chinese AI Labs, Taps Z.ai as Top Pick

Bernstein has initiated coverage of China's publicly traded artificial intelligence labs with a long-term optimistic outlook, identifying Z.ai as its preferred investment with an Outperform rating. In its initial analysis, the brokerage assigned Minimax a Market-Perform rating, highlighting a strategic preference for companies focused on coding and agentic AI over video generation.

Analyst Ratings and Price Targets

Bernstein set a HK$1,350 price target for Z.ai, citing the company's strong research background and its competitive GLM-5.2 model. The firm anticipates Z.ai will achieve non-GAAP operating breakeven around 2028 and believes its revenue will surpass consensus estimates in the coming years. Bernstein noted that recent share price weakness has reset expectations, positioning upcoming models like GLM-5.3 as important potential catalysts.

For Minimax, Bernstein assigned a HK$275 price target. The firm views the company's upcoming M3 Pro model as a "make-or-break" release following the underwhelming performance of its predecessor. Analysts argued that Minimax's focus on AI video generation represents a smaller long-term revenue opportunity compared to the coding and agentic AI applications pursued by rivals.

China's AI Sector Outlook

Bernstein projects that China's AI market could generate between $100 billion and $200 billion in annual revenue, excluding consumer applications. The firm's positive long-term view is based on several key factors:

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• Easing domestic computing constraints
• Improving reasoning capabilities of AI models
• Expanding adoption of lower-cost open-source models
• Continued government and private investment in domestic AI infrastructure

The Competitive Landscape

Looking ahead, Bernstein expects the competitive focus in the AI sector to gradually shift from raw reasoning power toward cost efficiency and the availability of computing resources. This transition will make more AI-driven tasks commercially viable.

However, the firm maintains that research capability and the performance of frontier models will remain the primary drivers of valuations for AI labs. This underpins their preference for Z.ai, whose coding-focused models are considered among China's most competitive.