China’s Kimi K3 has become the latest AI sensation, generating so much interest that developer Moonshot AI temporarily suspended new subscriptions just days after launch.

“K3 represented another example where the ability of China’s leading AI labs to keep pace with the US frontier has surprised global investors,” Bernstein analysts led by Robin Zhu wrote in a Friday note.

Beyond the excitement surrounding Moonshot, Kimi’s emergence is bringing new attention to Chinese tech giants Alibaba and Tencent, both investors in the startup.

Alibaba acquired a 36% stake in Moonshot during a financing round in February 2024, while Tencent is also a known investor.

But his opportunity extends beyond his bets on Moonshot, the Bernstein analysts wrote. As AI models become more competitive, cloud providers and internet platforms can gain bargaining power over model makers.

For Alibaba, Bernstein said Kimi’s success is “likely positive for Alicloud’s revenue growth.”

Meanwhile, Tencent may have an overlooked asset in Workbuddy, its desktop AI assistant, which has 8 to 9 million monthly visits.

Alibaba shares rose as much as 6% in Hong Kong on Monday, while Tencent gained 4%. The Hang Seng Tech Index rose 4%, as Kimi reignited the AI ​​narrative that DeepSeek helped generate last year. The broader Hang Seng Index added more than 2%.

The enthusiasm for Kimi has also fueled a broader debate about the economics of AI.

AI chip stocks sold off sharply on Friday, with investors wondering whether lower-cost Chinese models could reduce the need for the massive spending on AI infrastructure that underpins the current boom.

Chinese AI models are approaching frontier-level performance, while their prices are moving closer to those of mid-tier American systems.

“That challenges the economics of the current US-led AI stack, where cutting-edge capability has been coupled with very high compute and capital intensity,” Deutsche Bank analyst Jim Reid wrote in a note on Monday.

The concerns weighed on South Korea’s stock markets, which were on a white-hot rally until late last month.

On Monday, South Korea’s benchmark Kospi index closed down 4% as index heavyweights Samsung Electronics and SK Hynix lost more than 4%. The Kospi is now 28% lower than a month ago, although it is still 55% higher year-to-date.

Japanese markets were closed for a holiday.