Chinese AI stocks become nearly impossible to short before July

Friday 15 May 2026 - 07:03

By: Dakir Madiha

Chinese AI stocks become nearly impossible to short before July

Chinese investors seeking to bet against the country’s hottest artificial intelligence stocks are facing a severe shortage of shares available for borrowing. The problem centers on MiniMax and Knowledge Atlas Technology, two generative AI firms that debuted on the Hong Kong Stock Exchange in January and rapidly became some of the market’s strongest performers. Their limited free float has fueled aggressive price gains while making it unusually difficult for short sellers to establish bearish positions.

Knowledge Atlas, the parent company of Zhipu AI, entered the Hong Kong market on January 8 with an initial public offering price of HK$116.2 per share. MiniMax listed one day later at HK$165 per share and surged more than 100% during its first trading session before closing at HK$345. Both companies continued climbing in subsequent weeks. MiniMax’s market capitalization surpassed $35 billion by early March, while Knowledge Atlas shares traded several multiples above their IPO price as enthusiasm surrounding Chinese generative AI companies intensified.

The sharp rallies were amplified by lock-up restrictions that prevented a large portion of pre-IPO investors and insiders from selling their holdings. The resulting scarcity of tradable shares created an imbalance between supply and demand, pushing prices higher and limiting stock lending availability. Traders attempting to short either company have struggled to locate borrowable shares despite concerns over persistent losses and elevated valuations.

That market dynamic could shift dramatically in July when major lock-up periods expire roughly six months after the IPOs. Around July 7 and 8, restrictions covering about 44% of MiniMax’s pre-IPO shareholders and an additional 5% held by cornerstone investors are scheduled to end. The expiration would release nearly half of the company’s outstanding shares into the market. Knowledge Atlas faces a smaller but still meaningful increase in tradable stock, with cornerstone investors controlling approximately 5.8% of shares becoming eligible to sell. Executive lock-up agreements for both companies will remain in place until January 2027.

Analysts at Morgan Stanley estimate that the expected inclusion of both companies in the Hang Seng Tech Index on June 8 could attract between $1.25 billion and $1.75 billion in passive investment inflows. Those index-related purchases may temporarily support prices, but investors are closely watching whether the incoming supply of newly tradable shares will outweigh fresh demand and increase market volatility during the second half of the year.

Despite the strong market performance, neither company has approached profitability. MiniMax reported projected 2025 revenue of $79 million, representing annual growth of 159%, yet losses continued widening. During the nine months ending in September 2025, the company recorded a net loss of $512 million on revenue of only $53.4 million. Knowledge Atlas faces similar financial pressure as heavy spending on research and development continues to weigh on earnings. Investors are now assessing whether enthusiasm for China’s AI sector can absorb the coming surge in available shares or whether the end of the lock-up periods could trigger a broader correction.