Morgan Stanley is telling clients that the underperforming Hang Seng Tech Index is about to get an artificial intelligence injection. In a note circulated this week, the bank forecast that the upcoming inclusion of two Chinese generative AI champions — Knowledge Atlas Technology, the holding entity for Zhipu AI, and MiniMax — will trigger between $1.25 billion and $1.75 billion in passive investment inflows when they join the benchmark on June 8.
The call lands on a holiday-shortened week for Greater China markets. Mainland exchanges are closed May 4 and 5 for Labour Day, leaving Hong Kong as the primary venue for traders trying to position ahead of the rebalancing. Both Zhipu and MiniMax began trading in Hong Kong in January and have been among the strongest performers in a market that has otherwise lagged U.S. tech indexes.
Why the inflows are mechanical
The forecast is not a sentiment call. Funds that track the Hang Seng Tech Index are required to hold constituent stocks in proportion to their index weight, which means they must buy in regardless of valuation views once the additions are confirmed. That mechanical demand is the source of Morgan Stanley's projected billion-plus pickup.
For a benchmark that has struggled to keep pace with AI-driven rallies elsewhere, the addition of two pure-play frontier model labs reshapes the index's exposure. Until now, AI optimism has flowed mainly through hyperscaler proxies like Alibaba and Tencent rather than dedicated model builders.
Revenue trajectory
Morgan Stanley analysts argue the inclusion is more than a flow story. They project that each of the frontier Chinese AI models can generate at least $1 billion in revenue this year, with that figure more than doubling next year. Zhipu's models have become known for coding performance — its GLM family has placed competitively against U.S. open-weight rivals — while MiniMax has differentiated by spanning text, image, audio and video in a single product line, anchored by its Hailuo video generator.
A reordering of the China AI trade
The note coincides with broader investor reassessment after DeepSeek's V4 release narrowed the perceived gap with OpenAI and Anthropic, sending money chasing China's AI beneficiaries. Alibaba remains Morgan Stanley's top pick among China internet stocks because of its full-stack exposure from cloud to model training, but the inclusion of Zhipu and MiniMax now gives passive global capital a direct route into the country's frontier-model layer for the first time.
Implications
For Western investors who have struggled to access Chinese AI directly because of regulatory and listing constraints, the Hang Seng Tech inclusion is the cleanest on-ramp yet. For the labs themselves, joining a major index brings a more stable shareholder base and a higher cost of any future capital raise. And for the U.S. AI leaders watching from across the Pacific, the rebalancing is a reminder that the global AI capital pool is becoming less unipolar — even as Washington tightens export controls and questions the durability of Chinese model performance.
