Chip stocks rebound after Kimi K3 selloff as TSMC eyes price hike

The release of Moonshot AI's Kimi K3 on July 16 sent shockwaves through global semiconductor markets, pushing the Philadelphia Semiconductor Index into bear-market territory before chip stocks staged a recovery on Monday and Tuesday as analysts argued the model's massive compute requirements actually validate sustained demand for chips.

A DeepSeek Moment Revisited

Moonshot AI, a Beijing-based startup, unveiled Kimi K3 as a 2.8-trillion-parameter open-weight model — the largest ever publicly released — with performance rivaling Anthropic's and OpenAI's leading systems on standard benchmarks. The model activates roughly 40 billion parameters at inference time through a mixture-of-experts architecture, and offers API pricing at roughly half the cost of comparable proprietary models.forklog+3

The announcement triggered immediate selling across global tech stocks. On Friday, July 17 (the first full U.S. trading session following the Wednesday release), the Nasdaq Composite fell 1.4%, while the Philadelphia Semiconductor Index dropped nearly 4%. Asian markets were hit harder: Taiwan's benchmark fell 6.5%, Japan's Nikkei 225 plunged 4%, and SoftBank sank 9%, according to CNBC. TSMC Taiwan Semiconductor Manufacturing Company Limited ↘ 1.80% fell more than 7% despite having just posted record quarterly profit of $22 billion.bina-cyinnovation+3

The selloff pushed the Philadelphia Semiconductor Index more than 20% below its late-June peak, meeting the technical definition of a bear market.kucoin+1

Demand Overwhelms Capacity

By Sunday, July 19, Moonshot paused new user subscriptions after demand overwhelmed its computing infrastructure. "Kimi K3 has received far more love than we expected, and our GPUs are feeling it," the company posted on X, according to the New York Post. Reuters reported that the pause came as Moonshot prepares for a potential Hong Kong listing.nypost+1

Chip Stocks Stage a Comeback

By Monday and Tuesday, semiconductor stocks rebounded as Wall Street reframed the narrative. Bloomberg reported that chipmakers led gains in Asia, with TSMC rising on reports it would raise chipmaking prices by up to 10% starting next year — a signal that supply-demand imbalances remain intact. The Nasdaq 100 futures pointed more than 1% higher Tuesday morning, with tech leading the recovery.youtube+2

UBS had already raised its DRAM and NAND price forecasts in early July, projecting a 17-percentage-point demand-supply gap in DRAM by 2027. Bank of America raised its 2026 semiconductor revenue forecast to $1.3 trillion earlier this year. Analysts argued that Kimi K3's capacity constraints — forcing Moonshot to ration access — demonstrated that frontier AI models require ever more chips, not fewer.finance.yahoo+3