Hong Kong AI stocks could draw up to $1.75B after court ruling

Morgan Stanley expects between $1.25 billion and $1.75 billion to move into the Hang Seng Tech Index on June 8, when Knowledge Atlas Technology (trading as Zhipu AI) and MiniMax are added. Both companies began trading in Hong Kong in January and have seen sharp share price gains; Morgan Stanley raised its target for Knowledge Atlas to HK$990 from HK$560 and for MiniMax to HK$1,100 from HK$990.

The Hang Seng Tech Index has fallen more than 11% since the start of the year. Zhipu AI is known for models that handle coding tasks; MiniMax offers capabilities including text and audio generation. Access costs for Chinese AI models have narrowed versus U.S. models: in the first quarter Chinese model access cost at least 17% of U.S. model access, up from about 5% a year earlier.

Morgan Stanley analysts estimate leading Chinese AI model makers will each generate at least $1 billion in revenue this year, with revenue more than doubling the following year. Technology firms accounted for roughly 40% of funds raised through Hong Kong initial public offerings so far this year and about 43% of deals in the pipeline. The two largest stocks in the Hang Seng Tech Index, Tencent and Alibaba, have each fallen by double-digit percentages this year; Morgan Stanley named Alibaba its top pick among Chinese internet stocks.

Separately, the Hangzhou Intermediate People’s Court ruled last month that employers may not lawfully dismiss staff simply to replace them with automated systems. The case involved a worker who was asked to accept a lower-ranked position after his role was automated, refused the demotion and was fired. The court found the employer had violated the law, saying companies cannot shift operating costs onto employees and must protect legitimate worker rights when adopting new technology. The ruling added that AI can improve operations and working conditions, but cannot be used as a basis for unilateral pay cuts or contract terminations.

Survey data place China third globally in public trust toward AI, behind Nigeria and India. Other surveys show more negative public attitudes toward AI and technology executives in the United States.

In entertainment, short-form “micro dramas”—one-to-two minute episodes formatted for vertical phone screens-reached an estimated 660 million viewers in China in 2024 and are spreading abroad. South Korean producer Vigloo now spends about 30% of its production budget on AI tools, allowing it to complete a series in roughly one month instead of three and at about one-fifth the usual cost. Neil Choi, Vigloo’s chief executive, warned: ‘Competition from China’s micro drama industry keeps intensifying as the country backs AI-driven content production.’

The two AI firms join the Hang Seng Tech Index on June 8, while the court ruling took effect last month.