Chinese AI Firms Fall on Report of DeepSeek, Moonshot Probe

Shares of Chinese AI model developers, Z.AI and MiniMax Group, experienced significant drops following a report of a regulatory investigation into the startups. Z.AI's stock declined by up to 7.4%, while MiniMax Group's shares fell 6.3% in Hong Kong after the Information reported Beijing's probe. The investigation reportedly began after US AI company Anthropic accused DeepSeek and Moonshot AI of improperly routing sensitive data through their respective models.

Alibaba Group, which develops the Qwen model, also saw its shares drop by 4.2% in response to the report. This development adds to growing concerns among investors about potential increased scrutiny of Chinese AI firms amid heightened debate over AI safety. According to Leonid Mironov, portfolio manager at Gavekal Capital, investors are "afraid" Beijing may intensify its scrutiny of the AI industry, which could slow down China's model development.

Weakness in sentiment is attributed to the unclear scope of potential regulation, which could hinder China's AI advancements. Other AI-focused companies, including Xiaomi and Tencent Holdings, also saw a decline of around 2.5%.