Z.AI shares tumbled 5.01% at the opening of Monday's trading session, extending losses as investor sentiment soured following a bearish broker note and rising competitive pressures in China's AI landscape.

HSBC cut its target price on Z.AI from HK$1,900 to HK$1,500, while maintaining a Hold rating. The broker cited intensified competition in the AI model space and dilution effects from new share issuance as key concerns, despite the company having achieved its US$1 billion annual recurring revenue target ahead of schedule. Adding to the pressure, rival Moonshot AI's open-sourcing of its Kimi K3 model has further heightened the competitive intensity in China's frontier model landscape.

The decline comes just after a sharp 14.56% rebound on July 31, which had been driven by expectations of Z.AI's inclusion in the Hang Seng Index and the opening of its GLM Coding Plan subscription service. However, HSBC noted that sustained industry competition continues to weigh on valuation recovery, tempering the recent optimism.