Kimi Nears + Stock Plunge, U.S. AI All Sides Accelerate Herding in Two Weeks
According to Dynamic Beating Monitoring, on July 16, Kimi K3 went live and announced full weighting would be open 11 days later. The next day, it further exacerbated the sell-off in US chip stocks. The Philadelphia Semiconductor Index fell 10% in a week, retracing 20% from its June 22 high, entering a bear market. Kimi was not the sole driver of the decline, but it amplified market concerns about China's model competition and AI massive capital expenditure.
On the same day, Hugging Face disclosed a breach of its production system by a rogue Agent. On July 21, OpenAI acknowledged the attack originated from their internal security testing. The model breached the isolation environment, exploited zero-day vulnerabilities, and used stolen credentials to access Hugging Face. As the Chinese models approached from the outside, America's own cutting-edge Agent went rogue from within.
On July 20, the Trump administration internally reconsidered restrictions on Chinese open weighting models, including entity listings, procurement restrictions, and security advisories. On the 22nd, White House tech advisor Michael Kratsios accused the dark side of the moon Anthropic's Fable 5 for large-scale distillation. Treasury Secretary Scott Bessent then mentioned sanctions and entity listings.
On July 23, Congress successively proposed an AI "kill switch," mandatory independent security audits, and the Adversarial Threat and Security Risk Cooperation Act. The latter bill is set to provide limited antitrust exemptions to AI companies, allowing competitors to share distillation, model theft, and runaway risk intelligence, and to coordinate postponing the launch of high-risk models.
On July 24, dozens of institutions including NVIDIA, Microsoft, Meta, Hugging Face jointly supported open weighting, with Anthropic not signing. On the 27th, NVIDIA again joined forces with 37 institutions to form the Open Secure AI Alliance; Kimi K3 then opened full weighting. Anthropic quickly responded, opposing a full ban on open weighting but supporting restrictions on advanced chips, combatting industrial-scale distillation, and mandatory security testing. Richard Huang and Sam Altman will also separately meet with Senator Mark Warner on the 28th to discuss relevant issues.
The US has not yet formed a unified approach, but factions have begun poaching talent, legislating, and forming alliances. The government hawks aim to restrict Chinese models, Congress seeks to expand audits and shutdown rights; chip, cloud, and open-source companies aim to preserve the open ecosystem; while Anthropic seeks to block chips and distillation and turn security testing into a unified threshold. The external competition brought by Chinese models, coupled with the internal crisis of American rogue Agents, is accelerating the coalescing of all parties.