Cloud Deal With Alibaba
The launch put the company in the global spotlight.
Alibaba, one of Moonshot's biggest backers, has been pushing portfolio companies to use its cloud, several people familiar with the companies' operations said. The two companies compete too, and Kimi has outperformed Alibaba's own Qwen models on key measures while running on Alibaba's infrastructure. That has disappointed some Alibaba staff, one person familiar with internal discussions said, since rival teams had similar training resources.
None of the three companies, Moonshot, Alibaba or Nvidia, would comment.
The roughly 20,000 processors in the Alibaba arrangement are Hopper-generation chips, not Blackwells. Hoppers were the industry workhorse before Nvidia introduced Blackwell. Several sources familiar with the startup said the agreement covers H200s, the most powerful Hopper chips. Alibaba's spokesperson denied that it supplies H200-powered computing to Moonshot, did not deny a 20,000-chip arrangement, and would not identify which chips are involved.
Moonshot has attracted international attention because K3, released this month as an open-source model, performs at or near the level of leading U.S. models on several benchmarks. Its rapid rise has made it a test case for whether China can reach the frontier despite U.S. export controls.
Export Limits and the Policy Debate
For years, Washington has barred China from buying Nvidia's most powerful chips and from obtaining equipment needed to build its own AI processors. Meanwhile, U.S. corporations have invested hundreds of billions of dollars in data centers filled with those accelerators. Moonshot still produced K3, which has investors questioning the rationale behind the Western AI infrastructure boom and policymakers reassessing U.S. export policy.
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K3 also alarmed officials in Washington, financiers on Wall Street and technologists in Silicon Valley. The worry is that Chinese AI labs are catching up with American frontier labs, echoing the disruption caused by DeepSeek last year.
Nvidia's strongest Hopper chips always required an export license for China. The less capable H800 and H20 models were once free of export restrictions, but now need U.S. approval too. The Trump administration has issued some licenses for H200 sales to China, a notable policy shift. However, a senior U.S. official said only a "trivial" number of chips have actually been shipped under those licenses. Beijing has been reluctant to let domestic companies buy them and has pushed them toward Chinese-made alternatives such as Huawei Technologies Co.
Some Chinese cloud providers exploit a workaround: they access overseas data centers where foreign companies own restricted processors, a setup usually permitted by U.S. rules, and then rent that computing power to customers through cloud offerings. Where Alibaba's compute for Moonshot is physically located has not been disclosed.
Blackwell Accusations
A White House official said Moonshot "broke the rules." The U.S. government has not said how many Blackwells it believes Moonshot holds.
Blackwell sales to Chinese companies have long needed U.S. permission. U.S. officials also believe DeepSeek has Blackwells, according to Bloomberg.
But U.S. regulations generally let Chinese companies rent Blackwell computing power through cloud agreements.
Someone knowledgeable about Moonshot's purchasing approach verified that the startup can obtain Blackwell processors via Southeast Asia. The source declined to say whether this route is a rental arrangement, which is generally allowed, or direct procurement, which would violate U.S. law.
Why It Matters
The dispute underscores how hard it has become to separate U.S. chip policy from AI competitiveness. Washington has tried to keep cutting-edge Nvidia processors out of Chinese hands, but Moonshot's K3 release shows Chinese labs can still train models that match American leaders. The White House's accusation, paired with the belief that DeepSeek also has Blackwells, has intensified pressure to close the loophole that allows Chinese firms to rent restricted chips abroad.
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