Navigating China AI Models: New Frontier from Kimi K3; From Cost Efficiency, Intelligence to Pricing Power of Chinese Models
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Key Views
Chinese open-source and open-weight models are reaching an inflection point in intelligence performance, positioning them for global diffusion. Intensifying competition led shares of Zhipu (Neutral) and MiniMax (Buy) to decline 28% and 16%, respectively, on July 17. Standalone AI model companies stand out within Goldman Sachs's competitive positioning framework. Chinese President Xi Jinping, speaking at WAIC, likened AI's societal impact to that of electricity and the steam engine.
Outlook
For 2H26, Goldman Sachs expects additional model releases (Zhipu GLM, Alibaba Qwen, MiniMax M3 Pro) at 2–5 trillion parameters. High-end coding competition will intensify, while low-end API pricing stays pressured at approximately US$0.1–0.2 per million tokens. Multimodal and video generation models are poised for ARR growth, benefiting ByteDance SeeDance (70% gross margin, US$2 billion ARR), Kuaishou Kling, and MiniMax Hailuo/H3. Key risks include domestic ASIC supply, overseas access restrictions, and Western policy constraints.
Recommended Securities
MiniMax Group (0100.HK) — Buy, target HK$860 (DCF). Tencent Holdings (0700.HK) — Buy, target HK$700 (SOTP). Alibaba Group (BABA/9988.HK) — Buy, target US$186/HK$180 (SOTP, FY27E). GDS Holdings — Buy, US$32.75/HK$30.66. Kingsoft Cloud — Buy, US$10.06.
Key exhibits
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