Morgan Stanley has turned bullish on China's AI stocks, anticipating a shift in the country's large language model (LLM) market from price wars towards smarter models and stronger monetization. The bank expects higher AI pricing and tighter licensing to boost revenue, while larger models are seen raising barriers to entry.

In line with this outlook, Morgan Stanley raised its price target for an unnamed Chinese AI company to HK$1,700 from HK$990, citing stronger growth prospects. It also maintained a positive stance on MiniMax but cut its price target for the company to HK$900 from HK$1,100.