Kimi 3.0 Might Be a DeepSeek Moment; We’d Buy Several Cloud Computing Companies

Moonshot AI recently debuted Kimi 3.0, a 2.8 trillion-parameter open-weight model that claims to rival top-tier American frontier models like Fable 5. This launch triggered a broader selloff in major artificial intelligence stocks as investors weighed the potential impact of cheaper, high-performance models on the existing market leaders. Despite this market reaction, Morningstar Equity Research suggests the current dip in Alphabet, Amazon, and Microsoft shares is misplaced.

Technological progress in AI remains a positive signal for the entire ecosystem. If open-weight models truly drive costs lower, the resulting increase in demand for compute power serves as a direct tailwind for established cloud infrastructure providers. These companies control the underlying stack, meaning that any move toward high-performance, cost-effective models still requires the massive server capacity and security managed by current cloud giants.

National security and regulatory concerns also present significant hurdles for global adoption of open-weight models from certain jurisdictions. Western enterprises likely face pressure to avoid consolidating their AI operations on systems that may pose risks regarding intelligence control. This geopolitical reality limits the competitive threat these models pose to established US firms in the short term.

Morningstar maintains its fair value estimates for Alphabet, Amazon, and Microsoft, viewing the recent volatility as an overreaction to the latest benchmark data. The fundamental investment case for cloud infrastructure remains sound regardless of rapid shifts in model performance. As AI continues to evolve, the focus remains on the foundational companies that own the critical architecture of the digital economy.