What to Know About the Chinese AI Models Rattling U.S. Stocks
Rise of products such as Moonshot’s Kimi K3 raises concern about tech boom’s staying power
U.S. stocks fell Friday after China’s Moonshot AI released a new artificial-intelligence model. Shares of chip companies such as Nvidia and Micron Technology were particularly hard-hit, with a major semiconductor stock index down 10% over the past week. Here is what to know about China’s AI models.
Q: What is the new model that rattled the U.S. stock market?
A: It is called Kimi K3 and comes from Moonshot, a Beijing-based startup whose name is inspired by the Pink Floyd album “The Dark Side of the Moon.” Moonshot released Kimi K3 this past week and said it planned to make it fully open-source later this month, meaning people will be generally free to download and adapt it. Moonshot says Kimi K3 is the world’s biggest open-source model with 2.8 trillion parameters, a shorthand for a model’s capabilities. External researchers estimate that Anthropic’s Claude Opus 4.8, released in May, has more than 1.5 trillion parameters.
Q: Why is this release affecting stock prices?
A: Chinese AI models are generally designed to operate using fewer computing resources and offer better cost efficiency, in part because American export controls limit China’s access to advanced chips. This year’s stock market in the U.S. has been driven by expectations of huge demand for technology hardware to develop and use AI from the likes of Google, OpenAI and Elon Musk’s SpaceX. If Chinese models gain market share, such demand may not explode after all. That is what worries some investors.
Q: Is Kimi K3 as good as the U.S. leaders?
A: The AI benchmarking site Artificial Analysis ranks Kimi K3 in third place for intelligence, behind Anthropic’s Claude Fable 5 and OpenAI’s GPT-5.6 Sol.
The consensus in both the U.S. and China has been that the best Chinese models are months behind their top U.S. counterparts, perhaps a half-year or more.
But even if the Chinese models are slightly inferior, they are good enough for many tasks. Food-delivery company DoorDash says it uses an Anthropic model for cutting-edge tasks and a Moonshot model for lower-level workloads, achieving better performance at lower cost.
Q: This isn’t the first time Chinese AI has jolted U.S. stock markets, right?
A: That’s right. A similar bout of selling took place in January 2025 when a new model was released by DeepSeek, another Chinese AI startup with a cost-efficient open-source model. But stocks soon resumed their upward move. U.S. AI companies announced hundreds of billions of dollars in investments after the DeepSeek shock, reassuring markets that the AI revolution was real.
Q: Are the Chinese models dangerous for Americans to use?
A: Beijing has implemented some censorship of the data that companies use to train models and of the output of those models. Users of Chinese open-source models can tweak the models to bypass most censorship, though some say they can’t fully undo the influence of biases built into the training data.
Some lawmakers in Washington have called for limiting or banning the use of Chinese AI models in the U.S., saying reliance on Chinese technology could be weaponized by Beijing. For his part, Chinese leader Xi Jinping on Friday cast China as a champion of AI openness and said, “We should oppose overstretching the concept of national security in the field of AI.”
Q: What are the names of these Chinese competitors?
A: Here are five companies to know, in two baskets:
Startups: Moonshot, DeepSeek and a third Chinese company, Z.AI, are among the top runners in this category. All were founded by engineers from leading Chinese universities. Z.AI is listed in Hong Kong, while the other two are planning initial public offerings.
Older internet companies: E-commerce leader Alibaba and TikTok parent ByteDance have invested heavily in AI. Alibaba has an AI model called Qwen, including open-source versions, while ByteDance’s AI offerings include a model called Seed and a video-generating tool called Seedance.
Q: What’s next for markets?
A: Talk of an AI bubble has dogged stocks for years now, yet downturns have never lasted long. Investors are focused on whether companies such as Anthropic and OpenAI can garner enough business to justify their estimated trillion-dollar valuations.