Chinese AI developers Z.ai and Moonshot AI have released new models that have made a splash on the global tech sector, with Moonshot AI's release of Kimi K3 shaking Wall Street, triggering accusations from Washington that the startup was using proprietary US technology, and winning praise from competitor OpenAI's president. Markets have been rattled, with the Nasdaq 100 briefly entering correction territory earlier in the week, while South Korea's Kospi fell as much as 38 per cent in July before recovering some losses. Analysts say the sell-off has been fuelled by concerns about whether hundreds of billions of dollars of spending on AI by technology giants will generate adequate returns, partly due to growing competition from cheaper Chinese rivals. IG Market analyst Tony Sycamore said the broad thinking was the US was about six to nine months ahead of Chinese competitors, but recent developments show Chinese AI and infrastructure are as good as some US frontier models, providing another shake-up for Wall Street and associated markets in South Korea and Japan. The pullback is being most acutely felt in South Korea, and if US tech accelerates lower, it would flow through to Australians via super fund returns. For Australian businesses like Sydney-based startup Relevance AI, which helps companies including Canva, KPMG and Autodesk build AI agents, the competition is changing the economics of AI, with co-founder Jacky Koh saying his company is increasingly directing work towards models it can download and operate itself.