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

The recent launch of the Kimi K3 model by Moonshot AI has triggered a selloff in major technology stocks. While some investors fear this marks a shift in the artificial intelligence landscape, our analysis suggests these market reactions are misplaced. Alphabet, Amazon, and Microsoft remain core cloud infrastructure players that stand to gain from continued demand regardless of the specific AI models that enterprises adopt.

Kimi K3 is a large-scale open-weight model with impressive performance benchmarks. However, we remain cautious about comparing it directly to Western models like Anthropic's Fable 5, as open-weight results often rely on specific optimization strategies that may not translate to all real-world tasks. Additionally, national security concerns likely limit the adoption of such models within Western enterprise environments.

Even if open-weight models achieve parity with frontier models, the fundamental value of cloud providers is secure. Scaling AI requires significant infrastructure to handle data storage, security protocols, and resource management. Cloud companies provide the necessary backbone for any AI implementation, making them essential participants in the industry regardless of which model dominates the market.

We maintain our fair value estimates for Alphabet, Amazon, and Microsoft. The current market volatility presents a potential opportunity for long-term investors to pick up positions in companies that dominate the underlying architecture of the digital economy.