Summary of Key Points
The stock price of Zhipu has soared by 11 times in just 5 months, driven by a combination of factors including "fundamental strength, scarcity in the Hong Kong stock market, the power of a small trading volume, and a strategic timing window": Zhipu is one of the leading independent large-scale model companies in China with impressive financial growth; the Hong Kong stock market is its only option for listing, as it offers a rare opportunity for pure AI companies; the small trading volume (2.67%) gives a few investors significant pricing power; the inclusion in indices and the launch of the Stock Connect program in June brought in additional funds, and the period before the lock-up restrictions were lifted in July was exploited by market participants to drive up the stock price. Ultimately, the trading volume after the restrictions are lifted in July will be crucial in determining whether the price increase is supported by fundamental factors.
I. Strong Internal Capabilities: Both Technological and Financial Advantages, Making It a Rare Independent Player
Zhipu has attracted attention because it truly offers something valuable:
- Advanced Technology: Its GLM series of large-scale models are among the best in China, with continuous growth in API usage and open-source model downloads (over 45 million globally), with the GLM-5 model even matching the parameters of top proprietary models.
- Fast Financial Growth: Revenue increased from 57.4 million in 2022 to 312.4 million in 2024, at a compound annual growth rate of 130%; revenue for the first half of 2025 was 191 million (a 325% increase year-on-year), accounting for 60% of the full-year 2024 figure. Importantly, Zhipu focuses on the most valuable and challenging part of the AI value chain, holding a 6.6% market share in 2024, second only to larger companies like Alibaba and ByteDance—making it the only pure Chinese large-scale model company available in the Hong Kong stock market.
- Stable Business Model: 85% of its revenue comes from customized solutions for government and enterprises (with high per-client value and a 60% gross margin), while 15% comes from cloud-based APIs, indicating a more stable cash flow model compared to companies that rely on the consumer market.
II. The Hong Kong Stock Market as the Only Option: A-Stock and U.S.-Stock Markets Are Not Suitable
Zhipu had no choice but to list in the Hong Kong stock market, which was both a necessity and a stroke of luck:
- Limited Access to A-Stocks: After the registration-based IPO system reform, the criteria for listing loss-making tech companies became stricter, and large-scale model companies often take two to three years to become profitable, not meeting A-Stock requirements.
- Rejection by U.S. Stocks: Due to geopolitical pressures, there is a trend of Chinese tech companies returning to their home markets, making the U.S. stock market less favorable for them.
- The Right Fit for Hong Kong: In 2023, Hong Kong introduced special rules (18C) that allow unprofitable cutting-edge tech companies to list, making it the sole capital market option for such firms in China. Additionally, with few pure AI companies listed in Hong Kong (e.g., Tencent and Alibaba only have AI as a minor part of their business), Zhipu's scarcity is even more pronounced.
III. The Trouble Caused by a Small Trading Volume: A Few Investors Can Drive Price Surges
One of the key reasons for the 11-fold increase in stock price is the small trading volume:
- Limited Tradable Shares: Zhipu has a total share capital of over 400 million, but only about 12 million shares are actually traded on the market (2.67%). The IPO oversubscribed by 1159 times, with 11 cornerstone investors (such as Gao Yi and Taikang) holding nearly 70% of the shares, significantly reducing the number of tradable shares.
- Powerful Pricing: A market value of HK$60 billion corresponds to a trading volume of only HK$1.6 billion, meaning mid-sized hedge funds can easily drive price increases with their own funds. The price no longer reflects market consensus but is determined by how much buyers are willing to pay—whenever someone wants to build a position, they must bid higher.
IV. The Strategic Timing Window: A Month of Price Boosting Before the Restrictions Are Lifted
The timing of the price surge was carefully orchestrated:
- Double Benefits in June: Zhipu was included in the Hang Seng Technology Index (which passive funds worldwide must invest in according to weight) and the Stock Connect program, allowing mainland investors to buy its shares directly. These two new sources of capital flowed into a market with only 12 million tradable shares, significantly boosting the price.
- Lift of Restrictions in July: There was a one-month window between the June inclusion and the July restrictions being lifted, creating an opportunity for insiders to profit from selling their shares. This was not a violation of rules but a legitimate strategy.
V. The Future: Trading Volume After the Restrictions Will Be the Test
Whether Zhipu's price increase is sustainable depends on its performance after the restrictions are lifted:
- Learning from Kuaishou: Kuaishou's stock price soared by 3 times within three days of listing in 2021, but it fell by 80% a year later, driven by a small trading volume and index inclusion rather than fundamental strength.
- Current Valuation: Analysts estimate Zhipu's value at HK$54 billion by 2026, which is ten times lower than its current market value of HK$60 billion, indicating that the valuation is largely based on scarcity rather than fundamentals.
- Post-Restriction Monitoring: If trading volume increases and prices remain stable after the restrictions are lifted, it suggests that the price increase is justified by fundamental factors. If prices drop sharply and trading volumes shrink, it indicates that the surge was overinflated. This will be a test not only for Zhipu but also for whether the Hong Kong stock market has learned from Kuaishou's experience.
In conclusion, while Zhipu is a solid company, the 11-fold price increase is largely due to market factors and capital dynamics. Before chasing the rise, investors should consider whether they are buying into the company’s potential or simply betting on the scarcity of its shares.