Z.ai shares drop 10% after $5bn fundraising

Z.ai shares fell more than 10% on Monday after the Beijing-based artificial-intelligence developer completed a roughly $5 billion fundraising round. The new Hong Kong shares were priced at HK$714, a 10% discount to Friday’s HK$793 close.

The company issued 21.97 million new Hong Kong shares and sold 20.14 billion yuan of zero-coupon convertible bonds due in September 2027. The company stated the proceeds will be used for research and development, computing infrastructure, expansion and potential investments and acquisitions. The financing follows a roughly $4 billion raise in July.

Asian AI stocks fell broadly on the same day after industry executives called for a slower pace of model development on safety grounds, contributing to weaker sentiment in the sector.

Analysts highlighted the capital intensity of competing at the frontier of generative AI. Macquarie wrote that it is ‘still modelling loss-making into 2030’ for Z.ai and its sister model MiniMax, and noted China faces a shortage of advanced compute two to three times worse than the global shortage because U.S. restrictions limit access to some Nvidia processors.

Z.ai reported first-half revenue rose 400% to 953.9 million yuan. Macquarie estimated annual recurring revenue reached about $1.6 billion by August and said ARR could approach $3 billion by year-end, above management’s roughly $2.4 billion target.

Brokerages were split on valuation and outlook. Jefferies wrote that Z.ai’s ARR guidance beat expectations but that ‘sustainability remains questionable,’ citing customer concentration, uneven growth in computing supply, low switching costs and competitive pressure. Jefferies kept a Hold rating, cut its target price to HK$1,183.79 from HK$1,299.80 and lowered the multiple applied to Z.ai’s cloud business despite higher revenue forecasts. Goldman Sachs initiated coverage with a HK$1,880 target, citing strong coding usage that could support frequent model upgrades and enterprise adoption.

The fundraising adds cash and convertible debt to Z.ai’s balance sheet and further increases the company’s committed capital for R&D and computing capacity as it develops larger models.