Kimi jolts AI stocks and reignites U.S.-China fears

Moonshot AI has released a new version of its Kimi model, and the response has been immediate: fresh arguments over China, open source AI, and whether U.S. policy is helping or hurting domestic players.

Moonshot said Kimi K3 still trails top proprietary systems including Claude Fable 5 and GPT 5.6 Sol, but claimed the model showed frontier-level performance across its evaluation suite and consistently beat other tested models. Independent analyses from Arena.ai and Vals AI also indicated that Kimi is competitive with flagship frontier models.

The timing amplified the reaction. The launch coincided with a speech by Chinese president Xi Jinping at the World AI Conference in Shanghai, and appeared to rattle investors: the Nasdaq fell about 1% on Friday as traders sold chip stocks including Nvidia.

The debate echoes the backlash that followed DeepSeek’s open-source R1 release in January 2025, but the tone is sharper now, after the Trump administration’s tariff war with China, repeated clashes over the alleged national security threat posed by Anthropic, and as major AI companies move closer to public listings.

David Sacks — the Trump administration’s former AI czar and now co-chair of the President’s Council of Advisors on Science and Technology — used Kimi’s progress to criticize U.S. regulation.

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“tying itself in knots: politicians and bureaucrats are banning new data centers, piling on state regulations, and pushing for new federal agencies to pre-approve frontier models. This is how you lose the AI race.”

Sacks also took aim at Anthropic, calling Claude an example of “woke lobotomized models.”

Former Uber CEO Travis Kalanick focused on distillation, arguing that Chinese firms are training on the outputs of American models.

“If distillation isn’t enforced against, then everyone should be able to distill from everyone else.. otherwise one arm [would be] tied behind American models' backs,”

As TechCrunch notes, the flow is not one-way: American models have also been built on top of Chinese ones, including Kimi.

Not everyone framed the issue around copying. Dean Ball, OpenAI’s head of strategic futures, called Kimi “a very good model” and said its performance probably cannot be “explained away by distillation or anything like that.” He added that he was “personally surprised the Chinese state continues to allow the open sourcing of models this good, given potential risks.”

Ball went further, arguing that a world dominated by open-weight models could lead to “full AI communism,” where AI is treated as a “public good” provided by the state as “digital public infrastructure.” He also suggested the Trump administration may eventually decide to create regulatory risk around using open-weight Chinese models.

“You don’t need to 'ban open source' (one of the dumber motifs of AI policy discussion). You just need to direct every agency to issue soft law that creates FUD [fear, uncertainty, and doubt].”

Shakeel Hashim, editor of the AI publication Transformer, pushed back on the alarm. He argued that concern is likely overstated because Kimi “likely does not have dangerous cyber capabilities,” and because the Chinese government will face “extremely similar incentives” to restrict open Chinese models if they eventually do develop those capabilities.