(Oct 23): There’s no end in sight for the sell-off in China’s artificial intelligence (AI) model developer stocks, with competition growing ever more heated and the threat of rival listings next year.

MiniMax Group Inc and Z.AI Co, also known as Zhipu, have shed a combined US$150 billion (RM613 billion) in market value from their respective highs. The slide marks a brutal reversal after the duo’s hotly anticipated market debuts in January.

Domestic AI firms continue to slash token prices, while global giants Anthropic PBC and OpenAI have followed suit in order to minimise Chinese models’ cost advantage. Meanwhile, potential initial public offerings (IPOs) by DeepSeek and Moonshot AI could divert investor cash away from MiniMax and Zhipu, the only listed Chinese pure plays.

“Zhipu and MiniMax need to figure out how to win in the long term,” said Leonid Mironov, a portfolio manager at Gavekal Capital. “Between US models being better, and DeepSeek being most efficient, it’s hard to pinpoint exactly where MiniMax and Zhipu could go.”

MiniMax slid below its IPO price on Thursday, wiping out what had been a gain of 650% at its March peak. Larger peer Z.AI has tumbled 81% from its June high.

The new M3.1 Flash model released by MiniMax on Monday provided no lift for its stock, despite sharply reduced token costs and improved performance. Zhipu has seen a similarly cold reaction to the launch of its GLM-5.3-FlashX in September.

According to the Artificial Analysis Intelligence Index, the pair’s latest offerings are far behind models from the US leaders in terms of intelligence. They even slightly trail DeepSeek, Alibaba Group Holding Ltd and Xiaomi Corp amid the continued flood of new products vying for usership.

“China currently has more than 10 AI labs, but eventually will be consolidating to less than that,” said Alex Liu, an analyst at Bank of America Corp. “Right now it’s actually hard to say who’s going to survive or who’s going to be the first to drop off.”

On the plus side, Chinese models continue to dominate global usership. DeepSeek and MiniMax have officially completed registration for open-source releases and overseas use, a CCTV-affiliated WeChat account reported late on Thursday.

MiniMax already gets most of its revenue from outside of China, while Zhipu’s application programming interface (API) is gaining traction with global developers, JPMorgan Chase & Co strategists including Chloe Liu wrote in a note this week. The bank is bullish on Z.AI over MiniMax, seeing the former better positioned due to its coding capability.

The pair are still unprofitable, however, and global price wars make the bottom line outlook even tougher.

“Labs that lead on capability and paid API growth break even earlier than peers,” JPMorgan’s Liu wrote. AI models and applications should turn profitable “around 2028”, though the market remains focused on revenue mix for now, she added.

In addition to worries over competition, profitability and new Chinese AI stock offerings, Zhipu and MiniMax may also see pressure from looming share lock-up expiries. About 178 million Z.AI shares and 25 million MiniMax shares held by pre-IPO investors are due to become eligible for trading in January, according to data compiled by Bloomberg.

Uploaded by Tham Yek Lee