Several leading Asian AI companies suffered a sharp sell-off today, as the release of China's Moonshot AI Kimi model sent ripples through the industry, not just for LLMs and their competitors, but across the AI supply chain. Beijing-based, Hong Kong-listed AI lab Z AI dropped 48% over three trading sessions, while Japan's Kioxia fell 29% over the same span, and SK Hynix is down 15%. The Korean names have corrected especially sharply, amplified by unwinding in leveraged ETFs.

The correction in AI-related stocks, notably the four key Asia-based companies, continues, which isn't surprising given the market is awaiting earnings guidance from the hyperscalers reporting over the next few days. Those stocks are only likely to rebound if guidance comes in strong, and even then, it may be premature to call the start of the next rally.

In our July 6, 2026, report, we outlined eight reasons the AI trade was stalling and why those stocks were entering a correction, despite our bullish medium- to long-term outlook. One specific event first triggered the rally's stall: the May 28 news flow that companies were pushing back against "tokenmaxxing", the relentless spending on LLMs that might not justify the costs with limited return on investment for companies. But prices remained volatile afterward, as retail investors buying the dip battled a stream of negative catalysts: cheaper Chinese models, Meta offloading excess compute, and several other factors. The sharp correction in AI stocks didn't begin in earnest, however, until OpenAI delayed its previously expected 2026 IPO, a clear signal that AI momentum was fading.

The incremental improvements from frontier models have raised concerns that models are converging and becoming commoditized, with price emerging as the primary differentiator. In our June 29, 2026, report, we had already flagged that China's AI models had caught up to the frontier models, a development that was resetting the rules of the race. We noted that Chinese internet stocks had sold off sharply and looked cheap, and our focus was on a group of listed Chinese AI companies, volatile and risky, but one appeared to offer a potential trading opportunity as it retraced to its IPO level, prompting us to ask whether it was trading on support.

Korea ETF (EWY, LHS) vs. Anthropic share price (RHS)