Investors reassess artificial intelligence valuations after Chinese startup Moonshot AI unveiled its latest open-source model.
Global stock markets came under pressure on Friday after Chinese artificial intelligence startup Moonshot AI introduced a new AI model that renewed concerns over rising competition in the sector and the sustainability of heavy AI-related spending.
The company’s latest model, Kimi K3, is described as an open-source system designed to compete with leading AI platforms developed by major US firms, including OpenAI and Anthropic.
The announcement sparked a broad sell-off in technology shares, with the Nasdaq Composite falling 1.4 percent and the S&P 500 declining one percent. The Dow Jones Industrial Average also lost 407 points, representing a 0.77 percent drop.
Asian markets recorded even steeper losses. Taiwan’s benchmark index closed more than six percent lower, while Japan’s stock market fell four percent. South Korean markets remained closed due to a public holiday.
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Moonshot AI said Kimi K3 narrows the performance gap with some of the world’s leading artificial intelligence models. The company also described the model as the largest open-source AI system currently available.
The launch has renewed concerns among investors that freely available AI models could challenge the subscription-based business models adopted by many American technology companies. Analysts believe increased competition may also affect future demand for AI infrastructure, including advanced semiconductor chips.
Semiconductor stocks continued their recent decline, with a widely followed chip index falling 1.6 percent on Friday. The index has now fallen about 20 percent from its late June peak, placing it in bear market territory, despite remaining significantly higher than its level at the beginning of the year.
Major chip manufacturers also recorded losses. Shares of Micron have fallen roughly 30 percent from their recent high, although the stock remains well above its level earlier in the year.
The latest development has drawn comparisons with early 2025, when Chinese AI company DeepSeek unsettled global markets after introducing a model that challenged assumptions about US leadership in artificial intelligence. Although markets later recovered, investors remain cautious about growing competition from Chinese developers.
Several leading US technology companies also faced additional pressure. Shares of Alphabet, Google’s parent company, extended recent losses following reports that the company had delayed the launch of one of its flagship AI models.
Nvidia shares also declined by more than two percent, temporarily reducing the company’s market value below that of Apple, which briefly regained its position as the world’s most valuable publicly traded company.
Market analysts said investors had already become concerned that technology stocks, particularly semiconductor companies, had risen too quickly on expectations surrounding artificial intelligence.
Despite the recent sell-off, many investment experts remain optimistic about long-term demand for AI technologies. They argue that expanding global adoption of artificial intelligence should continue to support growth across the industry, even as competition intensifies.
Beyond technology stocks, investors also monitored developments in global energy markets. Oil prices climbed sharply following renewed military tensions involving the United States and Iran, raising concerns about possible disruptions to crude oil shipments through the Persian Gulf.
Brent crude settled at $88.10 per barrel, while West Texas Intermediate closed at $82.49 per barrel, marking their highest levels in more than a month.
Higher oil prices have also revived inflation concerns after recent data showed a slowdown in US consumer price growth. Analysts warned that a sustained increase in energy costs could complicate expectations for inflation and interest rates, adding another source of uncertainty for global financial markets.
