J.P. Morgan: Still bullish on China's AI model sector, names Z.AI (02513) as top pick in the sector

J.P. Morgan released a research report stating that demand for Chinese AI models is currently between two demand phasescoding and broader white-collar workwith AI demand beyond coding emerging later than the bank had originally expected. J.P. Morgan believes the market is overly pessimistic on China's AI model sector, maintains a bullish view, and names Z.AI (02513) as its top pick in the sector. The bank believes AI models can be viewed as the next-generation workforce for enterprises, with model companies akin to schools that train talent; enterprises select models based on specific capability thresholds, so demand grows in phases. Coding applications developed rapidly in late 2025 as model reliability reached the required level. China currently lags the US by at least about six months and remains in the coding application phase; the bank expects it to subsequently follow the US in gradually expanding toward broader application areas. The bank believes AI model commoditization and pricing power can coexist. Leading model developers can, on one hand, raise prices for top-tier models, and on the other hand, attract price-sensitive users through low-priced products while continuously reducing their own inference costs. Z.AI's unit inference cost under the same hardware conditions fell by about 80% this year, and the gross margin of its open platform and API business rose from negative 0.4% a year ago to 24.6% in the first half of 2026. J.P. Morgan believes industry value will concentrate in a small number of companies capable of continuously launching the most cutting-edge models. On company progress, Z.AI launches a new-generation model roughly every two to three months and has already raised its guidance; the bank expects GLM-5.5/GLM-6, to be launched in November, to become the next catalyst. MiniMax-W (00100) mainly focuses on cost-effectiveness; if its M3 Pro, to be launched in November, gains market recognition and can be priced in line with frontier models, J.P. Morgan may turn more positive on it.