China's two AI tigers have doubled since their IPOs. Why do analysts advise buying them?

Analysts at investment banks JPMorgan and Goldman Sachs have succumbed to the excitement in the market around the shares of Chinese technology companies related to AI, Bloomberg writes . Some of them have more than doubled in price since their IPO. But JPMorgan and Goldman Sachs expect them to grow even more and recommend buying.

Goldman Sachs assigned a "buy" status to Chinese chip makers Shanghai Biren Technology and MetaX Integrated Circuits Shanghai, noting their dominance in GPU (graphics processing unit) development. And JPMorgan began coverage of shares of Chinese language model developers MiniMax Group and Knowledge Atlas Technology JSC (better known as Zhipu) and immediately assigned them an "overweight" rating (above the market average), which also implies a buy recommendation, Bloomberg reported.

MiniMax and Zhipu were previously written about by Bloomberg and The Wall Street Journal as companies in China's "AI dragons" (or "AI tigers") group, which is how the PRC refers to startups that could become potential national leaders in generative AI.

MiniMax securities have been traded on the stock exchange in Hong Kong since the beginning of January. During the listing, the company, in which Alibaba and the sovereign fund of Abu Dhabi invested earlier, managed to raise $619 million. Since then, its shares have soared by more than 220%. At the trading on February 10, they, among other things, rose by 4.6%.

Zhipu went public in Hong Kong a day earlier than MiniMax - on January 7, - wrote The Wall Street Journal. The company raised $554 million by the results of the offering. Since the IPO its securities have grown by more than 170%. On February 10, Zhipu securities added almost 15%.

Also on Feb. 10, Biren securities rose (+3.5% at the close of trading in Hong Kong) and MetaX shares rose, plus 0.3%.

The emergence of many promising Chinese companies on the market is due to competition with the United States and last year's success of DeepSeek, which not only accelerated the development of the technology industry in China, but also attracted the attention of global investors to the Chinese market, Bloomberg writes. The agency points out that government support also plays an important role: Beijing actively assists local AI chip manufacturers in an effort to ensure the country's full technological sovereignty.

Against this backdrop, JPMorgan analysts characterize MiniMax and Zhipu as the most promising assets for those investors looking to capitalize on the next stage of global AI development. They highlight them as the leading independent developers of large language models (LLMs) in China, emphasizing their rapidly growing influence in the international arena, Bloomberg notes.

According to JPMorgan forecasts, until 2030, the average annual revenue growth rate of MiniMax, focused mainly on foreign markets, will be 138%, while Zhipu sales will grow by 127% per year. At the same time, analysts expect that both companies will be able to reach net profit by 2029.

In parallel, Goldman Sachs strategists are betting on the hardware part of the sector, naming Biren and MetaX as local leaders in the production of graphics processors. In their opinion, these companies will be the main beneficiaries of China's increased domestic spending on cloud computing and the government's policy of import substitution in the field of AI chips.

This article was AI-translated and verified by a human editor