China’s AI models unveiled at the World AI Conference in Shanghai on July 17 triggered a broad sell-off in US technology markets, with the Nasdaq down 1.4%, the S&P 500 off 1% and the Dow sliding 0.77%. Semiconductor stocks fell 1.6% that day, marking a 20% decline from a late‑June peak and formally entering bear territory.
## China’s AI models steal the spotlight in Shanghai
Two announcements dominated WAIC 2026. Moonshot AI introduced Kimi K3, an open‑source model the company says narrows the performance gap with Anthropic’s Claude. The open‑source nature of Kimi K3 means the model is freely accessible for developers and enterprises, rather than behind subscription fees. MiniMax, valued at more than $5 billion in recent funding rounds, unveiled M3, a multimodal model notable for a 1‑million‑token context window aimed at enterprise use cases.
Chinese President Xi Jinping used the conference to push open‑source development and global governance of AI, framing the approach as more collaborative than the subscription‑based models prevalent among some US firms. The scale of the event underlined the momentum: WAIC featured more than 1,100 companies, over 300 global product debuts, 261 large AI models and 108 chips.
## Market context and echoes of DeepSeek
The market reaction followed a familiar pattern. Investors recalled January 2025, when a DeepSeek model release produced a comparable bout of volatility and wiped hundreds of billions from tech valuations. That episode forced markets to confront a new risk: the erosion of a presumed US monopoly on
