Morgan Stanley: AI diffusion and industrial upgrading drive growth, optimistic about ZEEKR target price of 37 yuan

Morgan Stanley pointed out in its report that the development of China's industrial sector in 2026 will continue to revolve around three major themes: the diffusion of AI technology, industrial upgrading, and globalization progress. The advancement of equipment upgrades and "anti-involution" policies indicates the government's strong intention to enhance productivity, which will benefit high-end equipment manufacturing companies. Morgan Stanley is optimistic about the opportunities for Geek+ (02590.HK) to increase its global market share and believes that the company has the potential to successfully transform into a provider of unmanned warehousing solutions through other embodied intelligent products and services. The target price is set at 37 yuan, with an "overweight" rating.

The bank stated that under the guidance of industrial upgrading, AI technology diffusion, domestic replacement cycles, and overseas opportunities, the fundamentals of China's capital goods sector are recovering. Benefiting from overseas business growth and value chain upgrades, profit margins and return on equity are expected to expand. This trend is clearer in the sub-sectors during the upward cycle. The bank sees automation/robotics, battery equipment, and construction machinery in an upward cycle, while heavy trucks and railway equipment cycles are stabilizing, and solar equipment is at the bottom of the cycle. AI, centered around AI infrastructure, is creating equipment opportunities. AI applications are expected to accelerate in 2026 and redefine smart manufacturing.

Following a strong momentum in 2025, based on the bank's cloud capital expenditure tracking data, global capital expenditure for the top 11 publicly listed cloud service providers is expected to approach $620 billion in 2026, with global/China AI capital expenditure continuing to be strong in 2026. In terms of physical AI capital expenditure, the bank believes that the diffusion of AI into the physical world has only just begun, marking the next major phase of AI technology adoption. China is leading the industry in physical AI investment, thanks to favorable government policies and funding support, as well as a competitive supply chain ecosystem