Morgan Stanley Forecasts Major AI-Driven Surge for Chinese Tech Stocks

Morgan Stanley predicts a significant influx of more than $1 billion into Hong Kong's Hang Seng Tech Index, driven by the upcoming inclusion of two rapidly rising Chinese AI companies. Despite the index's 11% decline this year, excitement around Chinese AI innovation is mounting.

The addition of Knowledge Atlas Technology and MiniMax to the index on June 8 is expected to reshape the market landscape, signaling a new era where AI-focused firms become key drivers of Hong Kong's tech sector performance and investment flows.

Hang Seng Tech Index Faces Revival with AI Entrants

The Hang Seng Tech Index has struggled in 2026, dropping over 11%, with only a handful of stocks like Hua Hong Semiconductor and Lenovo showing gains. However, the imminent inclusion of two AI pioneers, Knowledge Atlas Technology and MiniMax, is set to inject fresh momentum into the index.

Morgan Stanley analysts estimate passive inflows between $1.25 billion and $1.75 billion as these companies join the index, reflecting strong investor confidence in their growth potential.

AI Innovators Driving Market Optimism

Knowledge Atlas Technology, known for its advanced coding AI models under the Zhipu AI brand, and MiniMax, which offers a broad range of AI capabilities including text and audio generation, have both seen their stock prices soar since their Hong Kong IPOs in January.

• Knowledge Atlas price target raised from 560 HKD to 990 HKD ($126.37)
• MiniMax price target increased from 990 HKD to 1,100 HKD
• MiniMax favored for cost-effective AI solutions compared to U.S. counterparts

The rising cost of accessing Chinese AI models, now at 17% of U.S. model prices compared to 5% a year ago, underscores growing demand and value for these technologies.

Chinese AI Market Set for Explosive Revenue Growth

Morgan Stanley forecasts that leading Chinese AI model companies will generate at least $1 billion in revenue this year, with expectations to more than double that figure in 2027.

Knowledge Atlas and MiniMax are trailblazers as the first major Chinese AI model firms to go public, while competitors like Moonshot and StepFun remain private.

"We believe AI and large language model names will become a much bigger driver of Hong Kong equity markets, reshaping index composition, performance, liquidity, and fund flows," said Morgan Stanley analysts.—Morgan Stanley Analysts

Regulatory Support and Market Implications

Strong regulatory backing is evident, with technology companies accounting for 40% of Hong Kong IPO fundraising year-to-date and 43% of the upcoming pipeline, reinforcing AI's role as a durable force in the market.

Meanwhile, giants Tencent and Alibaba have seen double-digit declines this year, though Alibaba remains Morgan Stanley's top pick among Chinese internet stocks due to its AI investments across cloud computing and AI models.

Looking Ahead: AI's Growing Influence on Chinese Tech Stocks

The inclusion of AI-focused companies in major indices marks a pivotal shift in Hong Kong's tech market dynamics. Investors and analysts anticipate that AI innovation will increasingly drive stock performance, liquidity, and fund flows, signaling a promising future for Chinese technology equities.