Hemingway Capital

Holy: China now has a 1-gigawatt AI data center built without a single Nvidia chip! Via Bloomberg: zAI has reportedly completed construction of the facility and begun partial operations. It runs exclusively on Chinese-made chips and will support the development of the company’s frontier GLM models. zAI has also built or operates several computing clusters containing more than 10,000 chips each. This is far more significant than the next Frontier model. The importance of chip independence from the USA can hardly be overstated.

We cut open the Kirin 9030 and put it under an electron microscope. The smallest metal pitch measures 32.5 nanometers. That is tighter than Intel 18A, their brand new leading edge node. A Chinese fab with no EUV is out-pitching Intel's EUV node by roughly 10 percent. What's going on here? 🤯 "This is the HiSilicon Kirin 9030, the chip inside Huawei's newest flagship phone. A few weeks ago, we cut it open, put it under an electron microscope, and measured the smallest wires inside the chip, the metal pitch. And what we saw was unexpected. The smallest metal pitch inside the Kirin 9030 measures only 32.5 nanometers. That’s smaller than the metal pitch in Panther Lake, which is based on Intel's brand-new 18A node. A Chinese fab, cut off from the most advanced tools, without EUV, is packing its wires about ten percent tighter than Intel's leading edge EUV node. What’s going on here?"

SITUATION BREWING: The Trump administration is considering restricting cutting-edge Chinese AI models, with momentum reviving after the launch of Kimi K3, per Axios.

The leading AI has already forked into two options. A: Closed source American that costs $26-56 per 1MM tokens. B: Open weight Chinese that costs $0.50-1 per 1MM tokens. If you force American companies to spend 50-100x more than their competitors abroad here is what will happen: 1. American companies spending 50-100x will at some point become financially impaired and the stock market will crater. This is the equivalent of the US Government saying we can only buy oil at $800/barrel even when the free market sells the same oil for $80/barrel. 2. In the short term, the revenues of the Closed American Labs may remain hi. But then their revenue will also crater because their customers in the US will be impaired and their customers abroad will have already flipped to cheaper solutions. This would be a terribly self-defeating form of intervention if it were to happen.

Alibaba is a major investor of Moonshot. Kimi, in turn, uses a big chunk of AliCloud GPUs (oftentimes competing away Qwen team's resources) 10 days ago, Alibaba previewed quarterly earnings saying AliCloud is growing 40+%. This was ofc before K3 Could be a monster quarter for APAC's biggest cloud

Kimi K3 has received far more love than we expected, and our GPUs are feeling it. Over the past 48 hours, demand has pushed close to the limits of our current capacity. To protect the experience of existing subscribers, we're temporarily pausing new subscriptions and prioritizing compute for current members. Existing subscribed users are not affected. We're adding capacity as fast as we can and will reopen new subscription spots in batches. Going forward, we'll also split membership into two more focused plans: Kimi Membership for Kimi Web, App, and Work; and Kimi Code Membership for coding workflows. This will help us match compute more precisely and keep the experience stable. Thank you for your patience and understanding!

Kimi K3 has received far more love than we expected, and our GPUs are feeling it. Over the past 48 hours, demand has pushed close to the limits of our current capacity. To protect the experience of existing subscribers, we're temporarily pausing new subscriptions and prioritizing compute for current members. Existing subscribed users are not affected. We're adding capacity as fast as we can and will reopen new subscription spots in batches. Going forward, we'll also split membership into two more focused plans: Kimi Membership for Kimi Web, App, and Work; and Kimi Code Membership for coding workflows. This will help us match compute more precisely and keep the experience stable. Thank you for your patience and understanding!

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Beginning July 20, Claude Fable 5 will be included in all Max and Team Premium plans, at 50% of limits. Pro and Team Standard users will continue to have access to Fable via usage credits, and will receive a one-time $100 credit. Demand for Fable has been challenging to predict, which is why we rolled it out to subscription plans in stages, extending access several times as we secured additional capacity.

These are very good questions. Many heated debates on AI tech and AI policy from just a couple months ago are being definitively settled in real time. The NVidia chip embargo looks increasingly like a major flop. Not only did it not prevent China from catching up it also ceded NVidia's dominant standard-setting for the AI hardware ecosystem in China and now potentially for large parts of the world that's not the US.