Daiwa: First Positive Rating for China's AI Industry, Top Pick BABA-W (09988)

Daiwa released a research report stating that it has initiated coverage of the Chinese AI industry with a positive rating, specifically focusing on foundational models. As model capabilities improve and smart costs decline, the industry is shifting from competitive benchmarking of models to large-scale model consumption, with the pace of commercialization exceeding expectations. It has givenBuy ratings for Z.AI (02513) and MiniMax-W (00100) with target prices of HKD 1,500 and HKD 530, respectively; while BABA-W (09988) is the top choice, maintaining a Buy rating with a target price of HKD 175. The bank's baseline scenario estimates that the total potential market size for AI programming in China will reach RMB 264 billion by 2030, with a compound annual growth rate (CAGR) of 266%. The total potential market size for consumer AI is projected to reach RMB 116 billion, with a CAGR of 154%, and there are even larger long-term opportunities in enterprise and multimodal applications. Recent evidence shows that both high-end capabilities and cost-effectiveness can yield returns. High-value programming, research, and agent workload continue to pay for stronger intelligence, while cheaper models capture token shares by making AI affordable for a broader range of developers, SMEs, and enterprises. Z.AI represents the capability route: it has repeatedly raised prices while usage increases, proving that cutting-edge performance can command a premium. MiniMax represents the efficiency route: its competitive intelligence, multimodal breadth, and lower service costs position it for high adoption rates. As Qwen 3.8-Max catches up in capabilities, Alibaba is combining both strategies, even having proprietary ASIC, a cloud ecosystem, and financial strength.