Moonshot’s Kimi K3 forced a temporary suspension of new subscriptions after demand pushed its capacity close to its limits, a sharp sign that Chinese AI models are no longer sitting on the sidelines of the U.S. market. The pressure is coming from below and from the margins: users and companies are turning to systems that are cheaper, open and increasingly intelligent, while the big American firms and the state apparatus scramble to keep control.
Who’s Using What
San Francisco-based Raffi Krikorian, the chief technology officer at Mozilla, said he switched to Kimi K3 for many of his day-to-day activities within days of the model’s launch more than a week ago. “It just seems snappier,” he said, comparing it to the more expensive Claude Fable chatbot from San Francisco company Anthropic. Earlier, he had been using another high-performing Chinese model, Z.ai’s GLM-5.2, for routine tasks such as managing his calendar, documents and email. That’s the real story here: even people inside the U.S. tech world are reaching for tools that cost less and work well enough, instead of paying tribute to the usual gatekeepers.
Curt Meinhold, a Greensboro, North Carolina-based technology executive, said he increasingly prefers to use DeepSeek for tasks such as finding business leads or ways to generate sales. “At the end of the day, most of us, the vast majority of us, 90 plus percent, don’t need (Anthropic’s) Mythos or Fable,” said Meinhold, who founded digital legacy platform LilyList. “Like, we just don’t need it, we need something good enough.” He said, “The Chinese models, you know, I find them to be pretty close on code and research. If I can pay a handful of cents per million output tokens versus 30 bucks or 40 bucks or 50 bucks, then it’s good enough.”
That price gap matters. AI prices are calculated per million tokens for both input and output, and analysts including Alex Colville of the Australian Strategic Policy Institute said the use of AI “agents” is dramatically compounding cost differences. Goldman Sachs wrote in a July research report that Chinese AI models are reaching a “critical stage” for wide adoption, especially as global “agentic” AI usage drives higher demand for cost effective AI models.
The Power Struggle Behind the Screens
U.S. companies including cryptocurrency exchange Coinbase have said they’re switching to Chinese AI models to help trim costs. Their popularity has frustrated some U.S. tech giants, but short of an outright ban, they’re likely to continue to appeal to independent software developers in the U.S. and elsewhere. That’s the shape of the fight: not a clean market contest, but a struggle over who gets to set the terms, who gets locked out, and who gets to profit from the machinery.
American-led restrictions block China from accessing some of the world’s most advanced technologies, including cutting-edge AI chips, and U.S. Treasury Secretary Scott Bessent has warned more sanctions could be coming to protect American intellectual property. U.S. President Donald Trump’s administration on Wednesday accused Moonshot of using “covert” but not necessarily illegal methods to build K3 off the back of Anthropic’s Fable. Some U.S. politicians and AI companies including Anthropic have accused Chinese startups of illicit “distillation” of their models to extract their technologies, a claim that Beijing rejects as “groundless.”
The state and the corporations are both busy drawing lines around access, ownership and imitation. Ordinary users are left to navigate the fallout, while the biggest players fight over intellectual property, sanctions and control of the tools.
Open Models, Closed Systems
Most Chinese AI models are open-source, meaning anyone can examine and build on them, at a time when frontier models from U.S. companies like Anthropic and OpenAI are closed-source. Chinese model vendors are expected to leverage open-source software to promote their global usage and adoption, said Lian Jye Su, of the technology research and advisory group Omdia. As Chinese open-source models are increasingly almost as good as closed systems made by leading U.S. companies, said Mozilla’s Krikorian, “the open frontier is becoming increasingly Chinese-built.”
While the U.S. weighs restricting Chinese AI models, a group of American tech firms including Microsoft, Meta and Nvidia signed an open letter published Friday backing “open” AI models. The timing says plenty. The same industry that hoards closed systems when it suits them suddenly finds religion in openness when the competition starts slipping through the cracks.
Other U.S. tech policies also at times give China an upper hand, some experts say. China’s Z.ai released its GLM-5.2 model in mid-June, not long after the Trump administration put export controls on Anthropic’s Fable and Mythos models, keeping them offline for more than two weeks. “Restricting an American model can immediately create an opening for a Chinese competitor,” said Arena’s Anastasios Angelopoulos. The apparatus keeps trying to manage the race from above, and the market keeps finding ways around the barricades.
China’s Push Abroad
In China, people and businesses have rapidly embraced AI technologies that have prospered with state support. Chinese tech companies like Huawei and Tencent are also embedding AI in devices such as smartphones, AI glasses and humanoid robots. Now China is increasingly looking to dominate AI abroad, too. At a flagship technology summit in Shanghai, Chinese President Xi Jinping championed open-source AI models and the importance of promoting greater global equity, while pledging Chinese involvement in raising AI capabilities especially in developing nations.
As is true for many other industries in China, intense competition at home is driving companies to expand globally. Leading Chinese AI startups are now raising more funding to support that effort, including through public share offerings. Both China and the U.S. will want to “encourage widespread adoption of their AI ecosystems, while safeguarding technologies that could materially strengthen strategic rivals,” said Chelsey Tam, with investment research firm Morningstar. “The competition is no longer simply the United States against China; the Chinese labs are also putting a lot of pressure on one another,” Angelopoulos said.
But the money machine has its own cracks. Z.ai reported its revenue surged 132% to 724 million yuan ($107 million) last year, but net loss jumped 60% to 4.7 billion yuan ($694 million). For now, Chinese AI models will likely continue to march ahead including in the U.S. “I would highly recommend anyone doing any serious AI load to at least evaluate it,” said Krikorian. The users are already evaluating it. The bosses are the ones trying to catch up.