Chinese AI takes on the giants. Free Kimi3 Sparks Market Panic

“New lead: Chinese start-up Moonshot has caused a stir in the artificial intelligence market. Its free, open model, Kimi3, rivals the best Western systems, forcing industry giants to battle over pricing, customers, and global AI standards. The US is considering a response.

 

DeepSeek, a Chinese AI model, caused significant market turbulence in February 2025. The launch of its R1 variant was likened to the Soviet launch of Sputnik in 1957. Investors were alarmed that Chinese developers could create high-quality AI at a lower cost than Western firms. This triggered a sell-off of US tech stocks. However, the downturn was short-lived, and investors quickly returned to enjoying the bull market and the AI ​​boom. Recently, the scenario repeated itself.

 

A sharp sell-off of tech stocks occurred after the Chinese start-up Moonshot created the Kimi3 AI model. By certain metrics, it proved to be on par with advanced models such as OpenAI’s GPT 5.6 Sol and Anthropic’s Claude Fable 5.

 

Moreover, Moonshot made its model available for free.

 

It is also an open model, meaning anyone who downloads it can modify it to suit their own needs.

 

This sent shockwaves through the markets, as a free alternative to expensive AI models had emerged.

 

US officials and Anthropic have accused Moonshot of training its AI model on content generated by other models. The Chinese deny it. However, ideas are emerging to ban the use of their artificial intelligence models in the US on national security grounds.

 

Chinese AI models raise US security concerns

 

According to *The Wall Street Journal*, US security officials have spent the past year considering various measures to toughen policies regarding Chinese AI companies developing open-source models, according to people familiar with the discussions. Options under consideration included adding these companies to trade blacklists, issuing security warnings about Chinese AI firms, and potentially issuing an executive order targeting open-source models. However, sources told the newspaper that internal disagreements within the administration have so far prevented any such action from being taken.

 

"One likely outcome of a world dominated by open-source AI models is full 'AI-communism,' which is exactly what China is proposing: instead of a market product, AI is intended to be a 'public good' ultimately provided by the state as a form of 'digital public infrastructure,'" wrote Dean Ball, Head of Strategic Perspectives at OpenAI, on the platform X.

 

Anthropic CEO Dario Amodei has long warned of the risks associated with powerful, open-source AI systems. In a recent interview with Bloomberg, he stated that AI models with advanced cybersecurity capabilities—available for free download—could be harmful. "It’s a serious concern," he said in June.

 

– The top tier today is a race between two superpowers—the US and China—which together account for the vast majority of global token usage and enterprise AI deployments. American giants are betting on closed ecosystems and cloud monetization, while China is releasing powerful open-source models on a massive scale. It is a battle for global standards and data flow architecture—in other words, for strategic influence.

 

"Chinese models don’t have to win every performance test; it is enough for them to be good enough to serve as a cheaper, self-deployable alternative that grants nations and companies technological independence," Krzysztof Banasiak, Chief Product and Technology Officer at Alsendo, told *Parkiet*.

 

American companies are increasingly using Chinese AI models. They are drawn primarily by the low price combined with solid quality. According to data from OpenRouter—a platform that offers access to all major AI models in one place and tracks their usage—leading Chinese models like DeepSeek and Z.ai have surpassed American counterparts such as Anthropic’s Claude and OpenAI’s ChatGPT on the platform.

 

"Companies are starting to realize that they don’t need the best model—they can use faster and cheaper models," Eugene Cheah, CEO of the AI ​​platform Featherless AI, told the *Financial Times*."