Markets NVDA +2.06% JUL 19, 2026

Moonshot's Kimi K3 triggers 'second DeepSeek moment,' chip stocks lead global rout

The 2.8-trillion-parameter open model helped tank the SMH ETF nearly 9% for the week and briefly cost Nvidia the world's most-valuable-company crown.

BY HENLEY MARRAST · MARKETS DESK

Moonshot AI unveiled Kimi K3, a 2.8-trillion-parameter open-weight model, on Thursday, and by Friday’s close the VanEck Semiconductor ETF had shed nearly 9% on the week, its third weekly decline in four. Nvidia briefly ceded the world’s most-valuable-company crown to Apple. Traders are already calling it the second DeepSeek moment.

The tape told the story in layers. The S&P 500 fell 1.01% to 7,457.69, the Nasdaq slid 1.4% to 25,520.24, and the Dow gave up 406.55 points to 52,146.42. For the week, the Nasdaq lost 2.9% and the S&P 1.6%. Nvidia dropped 1.2% Friday, Meta more than 2.4%, and SoftBank, widely traded as an OpenAI proxy, fell 9.0%. TSMC lost 7% on the day despite posting a 77% jump in quarterly operating profit, a divergence between fundamentals and narrative that says everything about what’s actually being repriced.

What’s being repriced is the roughly $700 billion in hyperscaler capex that assumes the frontier stays proprietary and American. Moonshot claims K3 “substantially outperformed” Anthropic’s Opus 4.8 and OpenAI’s GPT 5.6 Sol, and performed “competitively” with Anthropic’s top-tier Fable 5. Arena.AI’s blind evaluations placed K3 ahead of all top U.S. models on front-end coding tasks and level with GPT 5.6 Sol in the general text category. Full weights publish July 27, meaning the model becomes self-hostable inside two weeks. Notably, Moonshot priced the API near Anthropic’s mid-range tier rather than undercutting it, a confidence signal legible to anyone who watched the 2017 ICO cycle’s pricing games.

“K3 raises the capability ceiling for China AI models, shifting the burden of proof to other independent AI labs,” Bank of America analyst Alex Liu wrote.

The selloff wasn’t monocausal. Netflix fell roughly 9% on earnings, the Iran war and rate fears loomed, and Apollo economist Torsten Sloek has warned the AI capex risk could tip the economy into recession. Asia registered the vibe shift most violently: Japan’s Nikkei dropped more than 4%, and Seoul’s Kospi, closed Friday for a holiday, had already swung 6.2% up, 6.4% down, and 8.9% down across the week. Chinese rival Z.ai fell nearly 30% in Hong Kong, which suggests markets are pricing not a China-vs.-U.S. story but a margin-compression story that spares no one.

DeepSeek taught the market that capability could arrive cheaply from Hangzhou. K3 is teaching it that the lesson wasn’t a one-off.

Sources

About the author

Henley Marrast

MARKETS DESK

Henley Marrast covers AI-equity flow, accelerator demand, and earnings prints for AI Sheet Report. She leads coverage of the public AI complex from the New York markets desk, with a focus on the daily tape and quarterly results. She has been writing about technology markets for several years.