Moonshot Kimi K3 rattles semiconductor stocks, SMH slips

Moonshot AI launched Kimi K3 on Thursday, a 2.8-trillion-parameter model with open weights. The company said it will publish the full model weights under a Modified MIT license on July 27.

Markets sold off on Friday. Taiwan’s benchmark index fell more than 6%, Japan’s market closed about 4% lower, and the Nasdaq slipped roughly 1.5%, its worst session of the week. Semiconductor and AI-related stocks led the decline. The VanEck Semiconductor ETF (SMH) moved below its exponential moving average for the first time since April and sits more than 20% below its late-June record high.

Independent testing placed K3 at 57 on the Artificial Analysis Intelligence Index, a composite benchmark tracking reasoning, knowledge, mathematics and coding. That score ranks K3 above Claude Opus 4.8, near Claude Fable 5 and OpenAI’s GPT-5.6 Sol on aggregate tests, with stronger results on some specific benchmarks.

Moonshot said the full weights will be released without a direct fee, enabling smaller labs and developers to run the model.

Analysts offered context. Bernstein analyst Robin Zhu described the release as ‘confirmatory,’ calling it another data point in the pattern of rapid progress. Morgan Stanley’s Gary Yu wrote that K3 ‘has received positive feedback globally, signaling an all-round catch-up of Chinese LLMs with U.S. leaders in model size, performance, and pricing.’

Market participants compared the reaction to January 2025, when DeepSeek released R1 and led to a large, single-session decline for some major chip suppliers, including a roughly $590 billion market-cap drop for Nvidia. This week’s selling was broader across chip and AI equities rather than concentrated in a single company.

Analysts noted that if independent testers confirm K3’s reported results, public release of the weights could increase scrutiny of U.S. AI firms’ infrastructure and chip spending. Moonshot’s combination of large-scale performance and planned low-cost distribution are the factors cited.

Moonshot is backed by Alibaba, which invested $1 billion in 2024 at a $2.5 billion valuation; Moonshot’s estimated value has since been reported at about $31.5 billion. An earlier Kimi version, K2.5, was found running behind Cursor’s Composer 2 before the developer acknowledged the open-source base.

The July 27 publication will provide a chance for independent evaluations of K3’s performance and for laboratories and developers to access the full model weights.