Short sellers have placed record bets against Chinese AI companies Zhipu AI and MiniMax Group, a wager that the country's intensifying AI price war will hammer their margins. The positions reflect a growing belief among investors that these startups, despite their promise, are stuck in a race to the bottom.
A Bet on Falling Valuations
The short interest in both firms has hit levels never seen before, according to market data. That means a significant chunk of investors are borrowing shares and selling them, hoping to buy them back at a lower price later. The scale of these bearish positions stands out even in a sector that's become used to wild swings.
It's not a single event that drove these bets. It's a steady accumulation of fear. Zhipu and MiniMax are among the most prominent Chinese AI startups, but they're now competing in a market where the biggest players are slashing prices and offering heavy discounts. That's squeezing the smaller firms from all sides.
Why the AI Price War Is Fueling Anxiety
China's AI sector has been in a bruising price war for months. Major players keep cutting the cost of their models and services, sometimes to zero, in a scramble to lock up users and data. That's a great deal for customers, but it's a nightmare for startups trying to build a business on thin margins.
Zhipu AI and MiniMax are both pushing out advanced models, but they're doing so while the market leader and other deep-pocketed giants undercut them. Investors worry that these two can't keep up without burning through cash at a pace that makes their current valuations look generous.
The short selling is a direct response to that tension. Traders see a situation where the companies are being forced to lower prices to stay relevant, which could eat into any potential revenue growth. It's a bet that the current share prices are overvalued, based on the market's belief that the price war will not let up.
A Sector With Little Room for Error
The record short positions are more than a sign about two companies. They highlight the larger fragility of the AI sector, where the hype of cutting-edge technology can't shield anyone from the cold reality of unit economics. In this climate, having a technological edge is not enough; you also need a way to defend pricing power. Without that, the market's mood can turn quickly, and the shorts are ready to profit from that shift.
This is also a reminder that in the current AI race, strategic positioning is everything. The companies that win won't just have the best models; they'll have the distribution, the customer lock-in, and the willingness to spend on the war of attrition. That's what the shorts are betting against for Zhipu and MiniMax.
As the price war rages on, the next few quarters will be the real test. The short sellers are making their call now. The companies are going to have to show they can survive, and even thrive, in a market that's anything but forgiving.
