Chinese Stocks Are About to Get a Big AI Boost, Morgan Stanley Predicts

Why It Matters

The AI‑driven index additions could revive the underperforming Hang Seng Tech sector and channel billions of dollars of new capital into Hong Kong’s equity market.

Key Takeaways

• Morgan Stanley forecasts $1.25‑$1.75 B inflows to Hang Seng Tech.
• Knowledge Atlas and MiniMax join index on June 8.
• Chinese AI model costs rose to 17 % of U.S. rates.
• Each frontier AI firm projected $1 B revenue in 2026.
• AI expected to reshape Hong Kong equity liquidity and fund flows.

Pulse Analysis

Chinese artificial‑intelligence firms are finally getting a foothold on Hong Kong’s public markets. After a sluggish start to 2026, the Hang Seng Tech Index has fallen more than 11 % while domestic AI startups such as Zhipu AI’s Knowledge Atlas and MiniMax have rallied on the back of strong IPO demand. Their inclusion marks the first time pure‑play AI model companies are represented in a major Hong Kong index, signaling a shift from hardware‑centric names toward software‑driven growth.

Morgan Stanley’s April report quantifies the market impact: passive funds tracking the index could pour between $1.25 billion and $1.75 billion into the two stocks, a sizable boost for an index that has seen only seven constituents rise this year. The bank also raised price targets, reflecting confidence that each company can hit $1 billion in revenue this year and more than double that in 2027. Notably, the cost of accessing Chinese AI models has risen to roughly 17 % of U.S. pricing, narrowing the historic discount and suggesting a maturing domestic ecosystem that can compete on price and capability.

For investors, the development offers both opportunity and risk. The influx of capital may improve liquidity and attract global AI‑focused funds, but the sector remains vulnerable to regulatory swings and intense competition from private players like Moonshot and StepFun. Moreover, heavyweight names such as Tencent and Alibaba continue to underperform, underscoring the need for diversified exposure. As Hong Kong’s regulators back tech IPOs—accounting for 40 % of YTD fundraising—the AI narrative is likely to become a permanent driver of market composition and performance.