On July 16, Moonshot AI officially unveiled the Kimi K3 model with 2.8 trillion parameters. This release triggered a powerful wave of sell-offs in the global semiconductor market, affecting both Asian and American exchanges.
On Friday, shares of chip manufacturers and AI companies plummeted worldwide. The steepest decline was recorded in Asia: Taiwan's index lost over 6%, while Japan's Nikkei 225 closed down 4%. In the US, the Nasdaq fell by 1.5%, marking its worst session in a week.
The "DeepSeek 2.0" Effect
Investors are already comparing this situation to the "DeepSeek effect," which crashed the market in January 2025 after the release of the R1 model. At that time, Nvidia lost approximately $590 billion in market capitalization in a single session. Now, shares of Chinese developer Z.ai have plunged nearly 30% in Hong Kong, and Nvidia temporarily ceded its title as the world's most valuable company to Apple.
Kimi K3 became the largest open-source model at launch. In the Artificial Analysis Intelligence Index, it scored 57 points, surpassing Claude Opus 4.8 and GPT-5.5. Its performance nearly matched Claude Fable 5 and GPT-5.6 Sol. The key point: in certain tests, Kimi K3 outperformed competitors at a fraction of the cost.
The model supports a context of 1 million tokens, as well as text and image processing. Full weights will be released on July 27 under a Modified MIT license, allowing smaller labs to use it for free.
Analysis and Outlook
Wall Street analysts largely anticipated such a reaction. Morgan Stanley described K3 as the result of steady progress rather than a shock. According to analyst Gary Yu, Chinese LLMs are comprehensively catching up to US leaders in size, performance, and price. Bernstein called the release "confirmatory": AI is developing rapidly, and China is keeping pace.
However, some experts consider the sell-off excessive. According to their data, K3's price is close to GPT-5.6, not radically lower. The downturn also affected cryptocurrencies: Bitcoin fell below $64,000.
It is worth noting that a broader sell-off in the chip market has been ongoing for several weeks. The Philadelphia Semiconductor Index is more than 20% below its late-June record—a formal "bear market." The Kimi K3 release merely accelerated the decline.
My expert conclusion: Kimi K3 is not just another model but a signal of a paradigm shift. China has stopped catching up—it is beginning to set the terms. For investors, this means that betting on unconditional US leadership in AI no longer works. The market will reassess the value of all AI-related assets, and this is only the beginning.