China’s AI Startups Surge as Investors Rotate Away From Big Tech After Lunar New Year

When markets reopened in Hong Kong after the Lunar New Year holiday on February 20, 2026, investors sharply shifted their focus toward China’s emerging generative artificial intelligence (AI) companies — bidding up shares in newly listed pure-play AI startups and tempering enthusiasm for the long-dominant internet giants. The momentum reflects broader investor optimism about AI’s growth potential and a re-evaluation of where future earnings in China’s tech sector might materialize.

At the forefront of this rotation were two of China’s most prominent AI startups: Zhipu, officially known as Knowledge Atlas Technology Joint Stock Company Ltd., and MiniMax Group Inc.. In early trading, Zhipu’s share price surged as much as 25%, while MiniMax climbed roughly 16% — adding to already impressive gains since their January Hong Kong listings, where both companies have seen stock prices more than quadruple.

These price moves underscore a broader recalibration among investors: capital is flowing out of diversified platform stocks and into pure AI bets. Major players like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — both of which reported strong consumer engagement during the holiday — saw their shares slide on the day the market resumed trading. Alibaba fell by as much as about 4.3%, and Tencent dropped 2.8%, even after holiday usage spikes in their respective AI tools.

Why Investors Are Rotating Into AI

Analysts say the rotation toward AI-centric equities reflects heightened interest in so-called “foundation model leaders” — companies focused on large language models and other generative AI technologies — as opposed to broader technology empires whose AI efforts are one of many business units. “Money is rotating into pure AI names,” said Billy Leung, an investment strategist at Global X Management, while diversified platforms such as Alibaba and Tencent are seeing some profit-taking.

Part of this optimism stems from the burst of activity leading up to the New Year. China’s homegrown AI startups have raced to launch updated models and features during the peak festive period, a strategy intended to capture heightened user engagement as millions experiment with digital services during the holiday. This flurry of releases, and competition ahead of anticipated new launch waves from established players, has helped keep investor attention squarely on the AI sector.

Wall Street’s Take on the AI Boom

Global financial institutions have weighed in with bullish outlooks on companies like MiniMax. Morgan Stanley, Jefferies and UBS have initiated coverage on the firm with ratings equivalent to “buy”, and UBS set a target price modestly above then-current levels. Morgan Stanley’s model projects MiniMax’s revenue could reach roughly US$700 million by 2027, implying a potential ten-fold increase over that span.

Such forecasts illustrate the narrative driving investor enthusiasm: generative AI startups — particularly those with scalable models and market traction — may be positioned for rapid growth if they successfully monetize their technologies across enterprise, cloud and consumer applications.

Traditional Tech Faces Pressure

At the same time, some of China’s established technology giants are confronting renewed scrutiny over how effectively their AI investments are contributing to revenue and profit. Although Alibaba’s AI-powered app reportedly processed 130 million orders during the Lunar New Year push, and Tencent’s AI offerings garnered tens of millions of daily users, investors are increasingly asking whether these efforts will accelerate earnings meaningfully.

Meanwhile, regulatory dynamics are also playing into market movements. Chinese authorities recently summoned major platform companies — including Baidu, Alibaba, Tencent and JD.com — directing them to rein in aggressive promotional campaigns and eliminate “involution-style” competition. This regulatory emphasis on healthier competition and more disciplined marketing could dampen near-term growth prospects for larger players, according to some strategists.

Broader Market Movements

Beyond pure technology stocks, other segments of the market saw mixed reactions as trading resumed. Travel and consumer-oriented names, for instance, experienced declines. Shares of carriers such as Air China and China Eastern Airlines slipped, while consumer-focused firms including duty-free retailers and precious metals stocks also posted downturns.

Overall, the post-holiday trading session highlighted a growing bifurcation in investor sentiment: broad platform bets that dominated China’s markets for years are now being reevaluated as the global technology landscape evolves, with concentrated AI plays attracting a disproportionate share of attention and capital.

What This Means for China’s AI Landscape

The surge in AI startup stocks is part of a wider narrative about China’s ambitions in artificial intelligence and related technologies. The country’s ecosystem has seen a proliferation of generative AI models from both startups and large firms, many offering open-source or low-cost alternatives to Western incumbents. This trend has bolstered interest in foundational AI technologies as not just consumer tools, but critical infrastructure for future competitiveness.

In this context, companies like Zhipu and MiniMax are more than just speculative plays: they are representatives of an evolving industry that Chinese investors and policymakers view as central to the nation’s next phase of technological advancement.