Daiwa has launched coverage on China's artificial intelligence industry, assigning a positive rating with a specific focus on foundational models. As model capabilities improve and the cost of intelligence declines, the sector is shifting from competition based on model benchmarks to large-scale model consumption, with commercialization advancing faster than expected.

Daiwa initiated coverage on Z.AI (02513) and MINIMAX-W (00100) with "Buy" ratings, setting target prices at HK$1,500 and HK$530, respectively. The firm named BABA-W (09988) as its top pick, reiterating a "Buy" rating with a target price of HK$175. In its base case scenario, Daiwa estimates that China's total addressable market for AI programming will reach 264 billion RMB by 2030, representing a compound annual growth rate of 266%. The consumer AI total addressable market is projected to reach 116 billion RMB, with a CAGR of 154%, while the long-term opportunities in enterprise and multimodal applications are even larger.

Recent evidence shows that both high-end capabilities and cost efficiency can yield returns. High-value programming, research, and agent workloads continue to pay for stronger intelligence, while cheaper models win token share by making AI affordable to a broader range of developers, small and medium-sized enterprises, and large corporations. Z.AI represents the capability route: it has raised prices multiple times while usage volumes increased, demonstrating that frontier-level performance commands a premium. MINIMAX-W represents the efficiency route, offering competitive intelligence, multimodal breadth, and lower service costs, positioning it for high-volume adoption. As Qwen 3.8-Max catches up in capability, BABA-W is combining both approaches, further leveraging its proprietary ASIC, cloud ecosystem, and financial strength.