Kimi K3 Redefines Chip Design: Three AI-Related Stocks Worth Buying

China's Moonshot AI has launched a new open-weight model, Kimi K3, which has captured market attention with its 2.8 trillion parameters. The company claims it designed a fully functional chip autonomously in just 48 hours without using proprietary electronic design automation (EDA) software. This news has shaken the outlook for the EDA industry, causing Synopsys (SNPS-US) and Cadence (CDNS-US) to drop nearly 9% on July 17.

However, Kimi K3 used a 45-nanometer process, which lags behind the current cutting-edge 3-nanometer and 2-nanometer processes by about four generations. In the short term, it is not sufficient to replace the specialized EDA tools required for advanced chip design.

Rather than the potential threat to the EDA industry, the market is more focused on which companies could benefit from the lowered barriers to AI chip design, as demand expands for models, applications, and infrastructure.

Foreign media have highlighted Tencent, Micron, and Alibaba, noting that the three companies possess advantages in AI ecosystems, memory, and cloud computing, respectively.

Tencent: Deepening Involvement in the Open-Source AI Ecosystem

Tencent (0700-HK) is trading at HK$477.8, with a market cap of approximately $528.57 billion and an estimated P/E ratio of around 13x. InvestingPro estimates a 24.2% upside to fair value, while the average analyst target price implies a potential 45.7% gain.

Tencent is not merely an observer of China's open-source AI wave but is actively participating through investments, AI agents, and the WeChat ecosystem.

Reports indicate Tencent invested 10 billion RMB at a $74 billion valuation in DeepSeek's latest funding round. DeepSeek, like Kimi K3, represents the rapid rise of open-weight models in China. If open-source AI continues to expand its influence, Tencent's investments in related firms could yield long-term strategic value.

After Beijing blocked Meta's $2 billion acquisition of Manus AI, Tencent is reportedly in talks to become Manus' largest shareholder. Manus specializes in autonomous AI agents, one of the most promising applications enabled by open-weight models reducing computational and deployment costs.

Tencent began testing its WeChat AI agent in June 2026, prompting JPMorgan to turn optimistic. With over 1 billion users, WeChat gives Tencent a rare large-scale AI distribution capability in China. If models like Kimi K3 continue to lower inference costs, Tencent can expand its AI agent services while improving long-term profitability.

Tencent's fundamentals remain solid, achieving a perfect Piotroski F-Score of 9, a gross margin of 56.4%, and 22 consecutive years of dividend payments. Nomura reaffirmed its 'Buy' rating on Tencent with a target price of HK$727.

Micron: Benefiting from HBM Demand Driven by Large Models

Micron Technology (MU-US) is trading at $848.95, up 3.72% in pre-market to $880.50, with a market cap of approximately $958.8 billion. Revenue grew 167%, with an estimated P/E ratio of 11.4x. The average analyst target price implies an 82.6% upside.

Kimi K3 has 2.8 trillion parameters. Deploying and running such large-scale models requires massive high-bandwidth memory (HBM) capacity. As China accelerates the release of open-weight models, global AI inference computing demand is expected to grow in tandem, making Micron's HBM3E product a key beneficiary.

Gary Tan, portfolio manager at Allspring Global Investments, told Bloomberg that China's push for open-source AI could accelerate the deployment of advanced local models. These models require more computing resources, thereby driving demand for underlying hardware such as networking equipment and memory.

Bank of America notes that memory accounts for about 35% to 40% of cloud AI capital expenditures. Despite Micron's rapid revenue growth, its estimated P/E ratio remains at just 11.4x, suggesting the market has not fully priced in the long-term growth potential of HBM demand.

However, different valuation methods yield starkly different views on Micron. InvestingPro's model estimates only a 2.8% upside to fair value, but 27 analysts have already raised earnings estimates, and the market average target price implies an 82.6% potential gain, reflecting analysts' clearly optimistic expectations for the HBM business opportunity.

Alibaba: Capturing Opportunities in Models, Apple, and Cloud

Alibaba (BABA-US) is trading at $114.97, up 3.46% pre-market to $118.95, with a market cap of approximately $262.26 billion and an estimated P/E ratio of 16.7x. InvestingPro estimates a fair value of $144.56, implying a 25.7% upside, while the average analyst target price suggests a 65.4% potential gain.

Alibaba's main advantages lie in its Qwen model, potential collaboration with Apple, and Alibaba Cloud's commercialization capabilities.

Hours after Kimi K3's release, Alibaba announced Qwen3.8 Max with 2.4 trillion parameters, claiming its overall capability ranks just behind Anthropic's Claude. China's rapid succession of large, cutting-edge models indicates the domestic AI race is intensifying. Alibaba is one of the few Chinese companies with both in-house developed models and large-scale cloud infrastructure, capable of converting model demand into actual revenue.

Apple is also a significant potential growth driver for Alibaba's AI business.

Apple Intelligence received regulatory approval in China in mid-July 2026 and confirmed the use of Alibaba's Qwen as the underlying model in the Chinese market. If these features are fully rolled out, they could reach hundreds of millions of iPhone users and generate substantial AI inference demand for Alibaba Cloud.

Barclays assigned Alibaba an 'Overweight' rating with a target price of $195 and estimated that Alibaba Cloud's EBITA margin had already reached double digits in the June quarter.

Alibaba had initially set a goal of achieving 10 billion RMB in annual recurring revenue (ARR) from its AI and cloud business, which it met one month ahead of schedule. It has since raised its year-end target to 30 billion RMB. Barclays believes that as model demand and cloud monetization capabilities rise together, Alibaba Cloud's revenue could achieve a year-over-year growth rate exceeding 40%.

In short, Kimi K3 is currently insufficient to disrupt the specialized chip design systems for advanced processes but may accelerate the adoption of AI models and chip design tools. Tencent stands to benefit from its investment and distribution ecosystem, Micron from HBM demand, and Alibaba from its dual strengths in large models and cloud monetization. These three companies have thus emerged as potential beneficiaries receiving attention in China's open-source AI race.