Nvidia, AMD tumble as China's Kimi K3 fuels AI chip selloff

A broad selloff in semiconductor stocks began Friday in Asia and carried into U.S. premarket trading, driven by weakness in Japanese chip names and amplified by news of Chinese AI progress. Japan's benchmark Nikkei 225 index fell 4%, with semiconductor stocks bearing the brunt: Kioxia, a memory chip maker, plunged nearly 16%; Tokyo Electron, an equipment supplier, fell about 8%; and Advantest, a test equipment maker, lost around 7%. The weakness quickly spread westward, hitting major U.S.-listed chip stocks including Nvidia, AMD, TSMC, Broadcom, Arm, and Intel, all trading lower before the opening bell.

The selloff gained urgency Friday because Alibaba-backed Moonshot unveiled Kimi K3, a new open-weight AI model with 2.8 trillion parameters that the company claims can compete with some of the strongest U.S. systems. The timing amplified investor concern that Chinese developers are closing the gap in AI faster than many had expected. Nvidia sits at the center of the AI buildout globally, and its business depends on a supply chain that includes memory makers like Micron, manufacturers like TSMC, and equipment suppliers like Broadcom and ASML. Any shift in the competitive landscape for AI—whether toward Chinese players or a more fragmented global race—threatens to reshape demand for the chips and systems that power AI training and deployment.

The selloff reflects a shift in investor sentiment about the global AI race. For months, U.S. investors have treated Nvidia and its supply-chain partners—Micron, TSMC, Broadcom, and ASML—as the primary beneficiaries of the AI buildout, assuming U.S. companies would maintain a lead in both model development and the hardware required to train and deploy them. The unveiling of Kimi K3 by Moonshot, backed by the Chinese tech giant Alibaba, challenges that assumption. A 2.8 trillion-parameter model competitive with leading U.S. systems signals that Chinese developers are not falling as far behind as the market had priced in, and may be closing the gap faster than expected.

This matters because Nvidia's dominance has rested partly on the assumption that the race for AI leadership would remain concentrated in the U.S., ensuring sustained demand for its chips and a stable supplier ecosystem. If Chinese competitors are advancing at pace, it opens questions about whether that demand will remain as concentrated as the market has assumed, or whether investment and development will fragment across geographies and players. The Friday selloff—starting in Japan and spreading to U.S. premarket trading—suggests that investors are repricing the risk of a more fragmented, competitive AI landscape.

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