Kimi K3 shows chip stocks still flinch at cheap Chinese AI

Chip stocks remain vulnerable to a single Chinese model release, and Kimi K3 just proved it again.

Wall Street had barely finished pricing in DeepSeek's earlier jolt when Moonshot AI's new model rattled the same nerves. The consensus had assumed chipmakers absorbed that lesson months ago. They had not.

The Nasdaq dropped 1% in the immediate aftermath of the release, a sharp move for an index still dominated by megacap tech. DRAM prices have plunged 40% amid what Reuters and other outlets describe as a deepening semiconductor rout, a collapse that speaks to oversupply fears layered on top of the AI-efficiency scare. Wall Street ended lower for the week as the chip selloff broadened, according to Reuters, showing the damage extended well past a single trading session.

Yet money kept moving into the sector even as it broke down technically. Investors poured $25 billion into semiconductor ETFs even as chip stocks entered a bear market, a split between headline price action and underlying flows. That gap suggests some investors are treating the selloff as a buying opportunity while others are fleeing the volatility outright.

The pattern echoes DeepSeek almost exactly: a cheaper, competitive Chinese AI model triggers doubt about how much hardware the next generation of AI actually needs. Each time it happens, chip valuations take the hit first and ask questions later.

For readers watching markets, the lesson is not about Kimi K3 specifically. It is about how thin the confidence behind chip valuations has become. A single foreign model release can still erase billions in market value in a single session, and a 40% DRAM price move shows the pressure is not confined to sentiment alone. Semiconductor stocks are trading in a bear market while capital still flows in, a contradiction that leaves no clean signal for where conviction actually sits.