Chinese AI Model ‘Kimi K3’ Spooks Investors, AMC Shocks Wall Street with Blockbuster Earnings

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Monday, July 20th. In today's episode, we'll break down the latest AI sell-off and tell you why a new Chinese model has investors questioning the entire AI trade. We'll also break down earnings from Domino's and AMC. Then stick around to the end of the show for some controversial takes about Christopher Nolan movies. We've got a great show for you today.
Let's go.
Well, guys, it was an ugly end to the week last week on Wall Street. Stocks sold off on Friday with both the S&P and NASDAQ dropping more than 1%. Overall for the week, the S&P lost 1.6% and the NASDAQ fell more than 4%, with the biggest source of pain being chip stocks. The Semiconductor Index dropped 10% last week. It was the worst week for the index since April of last year, and now it's down 20% from its June highs. So that means that chip stocks are officially in a bear market. It's a pretty dramatic turnaround, but keep in mind the sector is still up around 65% for the year. The big question now is whether this is just a healthy profit taking after the insane run up that we saw this year, or the start of a much bigger unwind in the AI trade. The other big thing overhanging the market is the Iran War. Both sides are exchanging fire across the region, and that's pushing oil prices higher again. Brent Crew jumped 16% last week, its biggest weekly gain in almost three months, and gas prices are back to about $4 a gallon here in the US. Now this morning, oil is actually pulling back a bit and stocks are moving higher after Iran said that negotiations with the US could still be pursued, but I feel like we hear that every single day at this point. Looking ahead, we have a stacked couple of weeks coming up. This week, we're getting earnings from Tesla, Google, and Intel, and then next week, we're hearing from Microsoft, Meta, Apple, Amazon, and we also have a Fed meeting next week. The big tech earnings are obviously gonna be closely watched. I think investors want an answer to whether all this AI capex is actually gonna pay off. So I can't wait to hear what the hyperscalers have to say. It could set the vibe for the rest of the quarter. We're gonna be staying on top of that along with the Fed meeting and everything else happening in the markets and recap all the important stuff here. So if you're new here, it is a great time to get subscribed to the podcast and tune in every day to stay in the loop. Let's run through some headlines, starting with Kimi K3. On Friday, a Chinese AI company called Moonshot AI released a new model called Kimi K3 and it rocked the market and has investors questioning the dominance of US AI companies. In fact, some people are calling this another DeepSeek moment. Remember early last year when DeepSeek dropped the cheap model and the market lost its mind with Nvidia losing $600 billion in market cap in a single day. The sell-off this time wasn't as brutal, but it is raising concerns around the AI trade. This Kimi K3 model has some impressive stats. It's the biggest open source AI model ever at 2.8 trillion parameters, and it beats models like Claude Opus and GPT 5.5 on some benchmarks, including coding. Now, even Moonshot admits that their K3 model trails Anthropix Fable 5 and OpenAI GPT 5.6, so China still hasn't fully caught up to the absolute best US models, but the gap is getting very small. What's mind blowing to me is that these Chinese AI labs are able to do this without having access to Nvidia's best chips. Now, the reason that investors are getting nervous here is that Kimi K3 might not be the best, but it is good enough for most cases and cheaper than American models. And that right there is the nightmare scenario for US AI companies. Not that China beats them on outright performance, but that these Chinese models undercut them on price. So imagine you're a company using AI. You might still use Anthropic or OpenAI's models for your hardest task, but for everything else, you might choose the Chinese model because it's 80 to 90% as good for a fraction of the price. Now, there is an important nuance getting lost in the panic right now. Deepsea scared the market because it needed less compute compared to the existing models back then. K3 is different. It's a massive model that needs a ton of memory, about 1.4 terabytes just to run the model locally. So the memory makers like SK Hynix and Samsung and Micron might actually be fine here. And even Nvidia's newest memory rich systems are what you probably need to deploy this thing. I think the bigger fear here is that AI intelligence might be getting commoditized way faster than investors expected. So all the money that OpenAI and Thrape, Google and other AI labs are pouring into developing their models might not see a return on that innovation. You know, if in the future you have five or 10 companies all building frontier level models and open source versions are available for cheap, the models from OpenAI and Anthropic become less valuable. Now the other wrinkle here is that Anthropic has accused Moonshot and DeepSeek and other Chinese AI labs for training their models using Claude and a process called distillation. Essentially these Chinese labs are using the output from Claude to train their own models. So there's also questions about whether China is actually catching up or just copying whatever the leading US labs are doing. Let me know in the comments on what you guys think about this latest development. Do you think that AI is getting commoditized? And does that change your investment output looking forward? Personally, to me, I feel like this is bullish for Claude providers because the demand for compute isn't expected to decline. And even with these Chinese models, they're going to require a lot of GPUs. But Wall Street is definitely getting nervous right now. Bloomberg reported that short bets against US stocks just hit a record high. In fact, short interest in the S&P 500 said its highest level going all the way back to 2010 So again, the next two weeks are going to be very critical because if Google, Microsoft, Meta and Amazon report strong earnings and they keep their AI spending high and show investors that they're generating a return from that spending, well, that could lead to a pop in their stock. And a lot of these short sellers could be forced to cover their position, which could result in a short squeeze. So definitely gonna be keeping my eye on that in the next two weeks.