China’s Kim K3 has become a sensation as its latest AI model, garnering so much interest that developer Moonshot AI suspended new subscriptions just days after its launch.
“K3 is yet another example of China’s top AI lab’s ability to keep pace with the US frontier surprising global investors,” Bernstein analysts led by Robin Zhu wrote in a note Friday.
Beyond the excitement surrounding Moonshot itself, Kimi’s rise has drawn new attention to the startup’s investors, Chinese tech giants Alibaba and Tencent.
Alibaba acquired a 36% stake in Moonshot in a funding round in February 2024, and Tencent is also a prominent investor.
But Bernstein analysts write that their opportunities extend beyond Moonshot stocks. As AI models become more competitive, cloud providers and internet platforms are in a position to gain bargaining power over model makers.
For Alibaba, Bernstein said Kimi’s success is “likely to be positive for AliCloud’s revenue growth.”
Meanwhile, Tencent may have an overlooked asset in its desktop AI assistant Workbuddy, which receives 8 million to 9 million visits per month.
Alibaba shares rose as much as 6% in Hong Kong on Monday, while Tencent rose 4%. The Hang Seng Tech Index rose 4% as Kimi reignited the AI story sparked by DeepSeek last year. The broader Hang Seng index rose more than 2%.
Enthusiasm for Kimi is also spurring broader debate around AI economics.
AI chip stocks tumbled on Friday, with investors wondering whether lower-priced Chinese models could alleviate the need for the massive AI infrastructure spending that is supporting the current boom.
China’s AI models are approaching frontier-level performance at prices close to mid-tier U.S. systems.
“This calls into question the economics of the current U.S.-led AI stack. Frontier capabilities are associated with very high compute and capital intensity,” Deutsche Bank analyst Jim Reid said in a note Monday.
The concerns weighed on the South Korean stock market, which had been rising sharply until late last month.
On Monday, South Korea’s benchmark Kospi index closed 4% lower, with index heavyweights Samsung Electronics and SK Hynix both down more than 4%. The Kospi is currently down 28% from a month ago, but is still up 55% so far this year.
Japanese markets were closed for the holiday.