Zhipu AI's Hong Kong IPO: A Strategic Play in China's AI Revolution

China's AI sector is undergoing a seismic shift, and Zhipu AI's Hong Kong IPO has emerged as a pivotal moment in this transformation. The company's January 2026 debut on the Hong Kong Stock Exchange, marked by a 3.3% opening surge to HK$126 per share, underscored investor enthusiasm for its ambitious vision of building general-purpose large AI models. With a post-listing market capitalization of HK$55.5 billion ($7.1 billion) and a valuation of HK$51.2 billion ($6.6 billion) at the time of its IPO, Zhipu AI has positioned itself as a key player in a sector poised for explosive growth. This analysis examines Zhipu's valuation potential amid Hong Kong's surging AI IPO wave, weighing its financials, strategic partnerships, and the broader market dynamics shaping its trajectory.

A High-Stakes Entry into the Public Market

Zhipu AI's IPO raised HK$4.35 billion, with 70% of proceeds earmarked for R&D of its next-generation multimodal large model (GLM-V) and computing infrastructure. The offering was oversubscribed 1,159 times by retail investors, reflecting strong demand despite the company's significant losses in the first half of 2025- a $330 million loss on just $27 million in revenue. Such losses are not uncommon in the AI sector, where heavy upfront investment in R&D is a prerequisite for long-term dominance. However, Zhipu's revenue growth projections-192% year-over-year in 2025 to RMB0.91 billion and a further 147% jump to RMB2.25 billion in 2026-suggest a path to eventual profitability.

The company's valuation, based on a price-to-sales (P/S) ratio of 96.6x for 2025 estimated sales, is a 30% discount to the average P/S multiples of comparable AI firms. This premium reflects investor confidence in Zhipu's technological edge, including its GLM series of large language models and partnerships with cities like Hangzhou, Zhuhai, and Chengdu to integrate AI into regional industrial strategies. These collaborations, backed by over 3 billion yuan in funding from local governments, highlight Zhipu's role in China's broader AI-driven economic transformation.

Benchmarking Against Peers and the Market

Zhipu's IPO coincided with a record-breaking surge in Hong Kong's AI IPO activity. In December 2025 alone, at least 25 AI-related companies debuted, marking the busiest month for such listings since November 2019. The broader Hong Kong IPO market raised HK$286.3 billion across 114 deals in 2025, driven by favorable regulatory reforms and a renewed appetite for tech-driven growth. While Zhipu's P/S ratio of 96.6x is among the highest in the sector, peers like MiniMax-projected to generate $80.9 million in 2025 revenue-commanded a base-case valuation of HK$301 per share, 82% above their IPO price range. This disparity underscores the market's willingness to pay a premium for companies with scalable, commercially viable AI applications.

Zhipu's strategic focus on multimodal models and enterprise solutions differentiates it from rivals. Its GLM-V project, aimed at enhancing visual and language integration, aligns with global trends in AI development and positions the company to capture a larger share of China's general-purpose AI market, where it already holds a 6.6% revenue market share. However, the high valuation multiples assigned to AI firms in Hong Kong-many of which lack profitability-raise questions about sustainability. For instance, C3 AI traded at a P/S ratio of 6.87x as of late 2025, far below Zhipu's 96.6x. This gap highlights the speculative nature of Hong Kong's AI IPO wave and the risks of overvaluation.

Zhipu's strategic partnerships with Chinese cities are a critical component of its growth strategy. Hangzhou, Zhuhai, and Chengdu have integrated Zhipu's AI models into their industrial ecosystems, leveraging the technology to boost productivity in sectors like manufacturing, logistics, and smart city infrastructure. These collaborations not only provide a steady revenue stream but also reinforce Zhipu's alignment with national AI policies. The Chinese government's emphasis on localized AI ecosystems has created a fertile ground for companies like Zhipu, which benefit from both public funding and policy tailwinds.

Cornerstone investors, including JSC International Investment Fund and JinYi Capital, further validate Zhipu's strategic value. Their participation in the IPO signals confidence in the company's ability to scale its commercialization efforts and expand its AI ecosystem. However, reliance on government-linked capital also introduces risks, as regulatory shifts or changes in policy priorities could impact future funding and partnerships.

Risks and Opportunities

While Zhipu's IPO has been a resounding success, its path forward is not without challenges. The company's current losses and heavy R&D spending raise concerns about its ability to achieve profitability in the near term. Additionally, the competitive landscape in China's AI sector is intensifying, with rivals like MiniMax and Baidu's ERNIE Bot vying for market share. Zhipu's success will depend on its ability to maintain technological leadership and translate its R&D investments into commercially viable products.

On the other hand, the broader market dynamics in Hong Kong remain favorable. The city's streamlined listing processes, such as the Technology Enterprises Channel (TECH), have made it an attractive hub for AI startups seeking access to capital. With global AI adoption accelerating and China's government prioritizing AI as a strategic industry, Zhipu is well-positioned to capitalize on long-term growth opportunities.

Conclusion

Zhipu AI's Hong Kong IPO represents a bold bet on China's AI revolution. Its high valuation, driven by aggressive revenue growth projections and strategic partnerships, reflects investor optimism about the sector's potential. However, the company's current financial losses and the speculative nature of AI valuations in Hong Kong necessitate a cautious approach. For investors, Zhipu's IPO offers exposure to a transformative industry but requires careful monitoring of its path to profitability and the evolving competitive landscape. As the AI sector matures, Zhipu's ability to deliver on its technological and commercial ambitions will determine whether its valuation is a visionary leap or a precarious gamble.