- China has spooked Wall Street again.
- Investors are dumping chipmakers’ stocks after the launch of Kimi K3.
- The new AI has called bets on Nvidia and OpenAI into question.
The launch of Kimi K3, a new artificial intelligence model from Chinese startup Moonshot AI, triggered a sell-off in U.S. tech stocks this week, led by chipmakers. Investors fear that cheaper Chinese AI models could reduce demand for expensive computing power, which has underpinned the current market boom, WSJ writes.
By the close of trading on Friday, July 17, shares of Nvidia, Micron Technology, and other chipmakers were under pressure, while the semiconductor sector index fell by about 10% over the week.
Kimi K3 Has Rattled the Market
Moonshot AI, which is headquartered in Beijing, unveiled the Kimi K3 model and said it plans to make it fully open by the end of July.
According to the company, the model has 2.8 trillion parameters, making it the world’s largest open AI model. At the same time, the Artificial Analysis platform ranks it third in intelligence, behind Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6 Sol.
Analysts noted that Chinese models are typically designed with lower compute costs in mind. This is partly due to U.S. export restrictions on supplying advanced chips to China.
That is exactly what is worrying investors. If Chinese companies can offer competitive AI at a lower price, the need for large-scale purchases of expensive GPUs may turn out to be smaller than the market expected.
At the same time, even if Chinese models lag behind U.S. flagships, they are already powerful enough for many practical tasks. For example, DoorDash uses Anthropic models for the most complex tasks, and Moonshot for less resource-intensive processes, which helps cut costs.
The Market Has Seen a Similar Reaction Before
Analysts note that a similar situation unfolded in January 2025 after the release of the DeepSeek model. At the time, US tech stocks also sold off sharply, but soon resumed their climb after OpenAI, Anthropic, and other companies announced multibillion-dollar investments in AI development.
Alongside Moonshot and DeepSeek, leading Chinese developers also include Z.AI, Alibaba with its Qwen model, and ByteDance, which is developing the Seed model and the Seedance video generator.
Meanwhile, discussions in the US continue over potential restrictions on the use of Chinese AI models due to national security risks. Against this backdrop, Chinese President Xi Jinping said that China supports the open development of artificial intelligence.
Earlier, Anthropic warned that without tighter controls on technology exports and investment, the US could lose its leadership in artificial intelligence by 2028 due to the rapid growth of Chinese companies.
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