Chinese AI model takes US tech industry by surprise with abilities rivaling Claude and ChatGPT

Another powerful new artificial intelligence model from China took the U.S. tech industry by surprise Friday, the latest sign that Chinese startups that publicly release their “open-source” AI technology are making the California titans of AI sweat.

The newest Kimi K3 model from Beijing-based startup Moonshot, run by a Pink Floyd-loving entrepreneur who earned his doctorate in Pittsburgh, appears to be catching up to the best versions of Anthropic’s Claude and OpenAI’s ChatGPT.

“This may be the single biggest release of the year,” and marks a moment when open-source Chinese models are surpassing closed U.S. models, said Anastasios Angelopoulos, co-founder and CEO of Arena, a platform for evaluating AI systems.

Kimi K3 topped the charts in Arena’s ranking of what it calls “front-end coding capability,” a measure of an AI large language model’s performance. “More results are rolling in that are likely to continue to show it is at the top of the pack,” Angelopoulos said on social media.

It was not likely a coincidence that K3’s unveiling came shortly before Chinese President Xi Jinping’s opening address Friday to the nation’s annual World Artificial Intelligence Conference in Shanghai.

American-led restrictions have blocked China from accessing some of the world’s most advanced technologies, spurring China’s efforts to build its own know-how and intensifying the rivalry between the world’s two biggest economies.

“The development of artificial intelligence should not be a solo performance by any single country but rather a symphony of global cooperation,” Xi said at the event.

Chinese AI models have shown large strides

K3 follows another major AI model release last month from the Chinese startup Zhipu, or Z.ai. Its new flagship GLM-5.2 model is already widely used by software developers around the world who say it can perform work almost as well as top U.S. models at a lower price.

The hype over the new Chinese model resembles the market-shaking panic that followed Chinese startup DeepSeek ‘s new model release in early 2025, though not everyone finds it justified. The response to K3 is an “overreaction shockingly similar” to DeepSeek’s release last year, said tech analyst Patrick Moorhead on social media. He said it could be good for parts of the broader AI industry but poses a revenue challenge to Anthropic and OpenAI.

During the conference, which runs until Monday, tech giant Huawei has also been showcasing a new AI computing system called the Atlas 950 SuperPoD, a signal that China increasingly is amassing the domestic hardware it needs despite U.S. restrictions on imports from chipmakers like Nvidia.

Moonshot hasn’t said what hardware it used to build K3, but the startup is a partner with Huawei.

The price to use K3 is the highest yet for a Chinese AI model, but is still half as expensive as OpenAI’s high-performing GPT-5.6 Sol model, according to a Friday report by Bank of America research analysts.

U.S. politicians and several major U.S. AI companies including Anthropic and OpenAI have accused Chinese AI models of illicit “distillation” of their models to extract their technologies, a claim that Beijing says is “groundless.”

Anthropic in February accused DeepSeek, Moonshot and a third China-based AI lab, MiniMax, of engaging in campaigns to “illicitly extract Claude’s capabilities to improve their own models” using the distillation technique that “involves training a less capable model on the outputs of a stronger one.”

Anthropic said that distillation can be a legitimate way to train AI systems but it’s a problem when competitors “use it to acquire powerful capabilities from other labs in a fraction of the time, and at a fraction of the cost, that it would take to develop them independently.”

But it can go both ways. San Francisco-based startup Anysphere, maker of the popular coding tool Cursor, has acknowledged that one of its top products was based on Moonshot’s K2.5 model. Elon Musk’s SpaceX is planning to close a deal to buy Cursor for $60 billion later this year.

K3 marks a leap for ‘open-source’ AI models

Moonshot co-founder and CEO Yang Zhilin earned his Ph.D. in 2019 at Carnegie Mellon University, where he is said to have made fundamental contributions to the machine-learning field and was known for a love of rock bands like Pink Floyd.

The pride among his former colleagues at the Pennsylvania school transcends the U.S.-China rivalry.

“What a huge win for the open-source community! It feels like just yesterday Zhilin was graduating from my lab at CMU,” wrote his former adviser Russ Salakhutdinov, who is also a former director of AI research at Apple.

Developers who build “open-source” AI make key components of the technology accessible for anyone to examine, modify and build upon. Proponents say open-source practices promote innovation, while critics warn that making powerful AI models publicly accessible poses safety and security dangers. ___

Associated Press writer Chan Ho-him contributed to this report.