Bearish bets against shares of Z.AI Co. and MiniMax Group Inc. have soared to records ahead of their earnings reports, highlighting growing investor worry over China's heated AI rivalry.
Short interest has climbed to account for 20% of the free float for MiniMax and 6% for Z.AI, or Zhipu, according to data from S&P Global. Short selling ramped up even after the Hong Kong-listed stocks tumbled from record highs following the pair's blockbuster listings early this year.
As the world's only listed pure-play model developers, Zhipu and MiniMax garnered attention as China built a reputation for cheap but good-quality AI. Investor infatuation has moderated, however, as competition on pricing and technology from Alibaba Group Holding Ltd., DeepSeek and Moonshot AI Inc. intensifies.
“Lower-cost, open-source models from China are democratizing frontier AI capabilities globally — that may challenge assumptions around the scarcity value of individual models,” said David Choa, head of Greater China equities at BNP Paribas Asset Management. “Given the speed of model development and the continued evolution of business models, we believe identifying permanent winners today would be premature.”
Zhipu shares are still up more than 800% and MiniMax's are up more than 80% since their January initial public offerings, though both have more than halved from peak levels. Triggers for selling have included MiniMax's price cuts for its M3 model in June, and the threat to Zhipu's GLM from last month's release of Moonshot's advanced Kimi K3.
Zhipu's recent launch of GLM-5.3 hasn't helped its shares, although Jefferies Financial Group analysts say it offers comparable performance to Kimi K3 at about 19% lower cost per task.
Mainland investors have shown support for the pair, though their heavy buying has yet to spark a rebound. Their stake in Zhipu has climbed to 12% in less than three months since joining Stock Connect, while their holding in MiniMax quickly rose to 8.1% within just two weeks of its inclusion, according to Hong Kong exchange data.
DeepSeek surprisingly moved to hike prices earlier this month, though it remains to be seen how this will impact industry profitability going forward.
Results due later Wednesday from MiniMax and next Monday from Zhipu will help show how the firms have weathered the challenges so far. Zhipu's first-half revenue is expected to have risen about 153% sequentially, but its adjusted net loss is expected to have widened, according to data from Bloomberg.
“Investors are increasingly concerned about the price war, which is hampering Zhipu's ability to raise pricing” and its profit margins, said Felix Wang, tech sector head at Hedgeye Risk Management. For MiniMax, its products are “stuck in the middle - not the most intelligent model, nor the cheapest.”
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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