Zhipu AI Stock Plummets 60% From Peak Amid Cash Burn Concerns

Zhipu AI (HK:2513), a leading Chinese developer of large language models, has seen its shares fall more than 60% from their 2026 peak, a sharp reversal for a stock that remains up over 872% year-to-date. The sell-off accelerated after the company raised $4 billion in a discounted share sale, highlighting investor concerns over its rapid cash consumption.

From Meteoric Rise to Sharp Correction

After its Hong Kong Stock Exchange debut in January 2026, Zhipu AI's stock embarked on a significant rally, surging over 1,300% to a high of HK$2,980, according to data from Investing.com. This positioned it as a top performer and a key proxy for investor enthusiasm in China's artificial intelligence sector.

However, momentum has reversed dramatically. The stock has since cratered 60.8% from its peak to trade around HK$1,169. In the past month alone, shares have shed more than 46% of their value, erasing a substantial portion of their earlier gains.

Capital Concerns Trigger Sell-Off

The recent downturn was intensified by several key factors related to the company's financial position and capital structure.

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• Urgent Capital Raise: On July 9, Zhipu AI raised $4 billion (HK$31.37 billion) by selling 19.78 million shares at HK$1,588 each. This price represented a 13% discount to the previous day's close, a move that often signals urgency to markets.
• Rapid Use of IPO Proceeds: The fundraising became necessary after the company consumed over 93% of its net proceeds from its January IPO by the end of June, indicating a significant cash burn rate to fund its operations and expansion.

Strategic Ambitions vs. Valuation

Despite the market turbulence, Zhipu AI is pursuing an ambitious strategy focused on developing its foundational GLM family of AI models and designing custom ASIC chips to reduce its reliance on third-party hardware. The company also received a vote of confidence when major state-backed cornerstone investors reaffirmed their commitment after a recent lock-up period expired.

Still, the company's valuation remains a key point of debate for investors. Even after the steep correction, Zhipu AI commands a market capitalization of approximately HK$524 billion (~$67 billion USD). This valuation is for a company that is not yet profitable and has short-term financial obligations that exceed its liquid assets, posing a significant risk for investors weighing its long-term potential against its current fundamentals.