The 18-month American artificial-intelligence trade — the single dominant story in US equities since 2024 — showed its widest crack yet on Friday, as investors extended a selloff triggered by the release of a Chinese model that has closed the performance gap with OpenAI's and Anthropic's flagship systems. Nvidia briefly lost the title of world's most valuable company to Apple, Elon Musk's SpaceX slid 5.5 percent to $122.12 — 9 percent below its June initial public offering price — and Chinese AI rivals cratered, with Z.ai down 28 percent, MiniMax down 16 percent and Alibaba down 4 percent.

The rotation puts a widening question mark over the leveraged AI bets that carried the Nasdaq-100 to record highs earlier this month. Retail traders piled into SpaceX calls after Musk's record $85.7 billion listing. The offering's Wall Street underwriters, led by Morgan Stanley and Goldman Sachs, raised an additional $11 billion in follow-on SpaceX equity after the strong debut. Institutional money crowded into Nvidia on the argument that no US company can dominate the next decade of computing without it. Friday's session tested every leg of that thesis at once, and analysts drew explicit comparisons to the DeepSeek moment of early 2025.

What shifted

Moonshot AI, a Beijing startup founded in 2023 and backed by Alibaba and Tencent, released Kimi K3 on Friday. The 2.8-trillion-parameter model beats Anthropic's Claude Opus 4.8 and OpenAI's GPT 5.5 on benchmarks including coding and general agents, according to Moonshot, though it still trails Anthropic's Claude Fable 5 and OpenAI's GPT 5.6 Sol on overall performance. Bank of America analysts led by Alex Liu described the release as evidence that "pre-training scaling, paired with architectural innovation, can still deliver step-change gains" for flagship Chinese models despite persistent hardware and compute constraints.

The SpaceX leg

SpaceX shares closed at $122.12, marking a sixth straight losing session and putting Musk's rocket, satellite and artificial-intelligence company 44 percent below its intraday high of $225.64 and roughly 23 percent below where it entered the Nasdaq-100 last month. The Nasdaq fast-tracked the company into the index after just 15 trading days. Friday's decline followed the Thursday scrub of a Starship V3 test flight because of what Musk called an engine ignition failure. "Some of the engines didn't start, triggering an automatic launch abort," Musk wrote on X. Two Raptor engines will be removed and replaced before another attempt.

Options activity told the same story. SpaceX traded just over 500,000 options contracts by late morning Friday, the 11th-heaviest volume in the market, with $350 million in total premium — $290 million of it tied to puts, according to SpotGamma. Seven of the 10 most-traded contracts by volume were puts. Retail bulls who piled into SpaceX calls after the IPO are underwater or run over, and the Wall Street underwriters that raised follow-on equity have absorbed similar pain. "I've been selling way out-of-the-money puts," said Don Kaufman, co-founder of TheoTrade and a former director at TD Ameritrade. "I'll buy it all day long at $100."

The chip pivot

Nvidia's 9 percent gain in 2026 looks meager against the mega-cap peer group. Apple has surged almost 23 percent, and HSBC upgraded the stock to a buy Friday, citing what analysts called "one of its most innovative product pipelines in place." The two companies traded the top market-cap spot at Friday's open, with Nvidia briefly dipping to $4.84 trillion and Apple pushing to $4.88 trillion before Nvidia closed marginally ahead. Nvidia had held the crown since June 2025 and became the first US company to top $5 trillion in market value in October.

Money that once chased Nvidia has been rotating into memory. Micron Technology and Sandisk have absorbed those flows as Wall Street pivots to what CNBC called the "memory chip and infrastructure stage" of the data-center buildout.

The China cascade

Chinese model builders bore the sharpest single-day damage. Z.ai, which released its own frontier model to fanfare in June, closed 28 percent lower. MiniMax fell 16 percent. Alibaba, whose Qwen open-weight family has anchored the country's self-styled "open-source leader" narrative, dropped 4 percent, erasing most of a gain from earlier in the week when the company was reported to be partnering with Apple in China.

"K3 raises the capability ceiling for China AI models, shifting the burden of proof to other independent AI labs," Liu wrote. Moonshot itself raised $2 billion at a valuation above $20 billion in May, Bloomberg reported, in a round backed by Alibaba and Tencent.

Counterpoint

Not everyone reads Friday's selling as vindication of a peak-AI thesis. Patrick Moorhead, chief executive of Moor Insights and Strategy, called the reaction "an over-reaction shockingly similar the DeepSeek panic" in a post on X, arguing that models like Kimi K3 will only "accelerate and grow the inference market faster than without" and adding that the field remains "far away from super-intelligence." Moorhead told CNBC in an email he traced the response to Washington's debate over whether US companies should enable Chinese access to their models. Neither the White House nor the Commerce Department publicly responded to the selloff by press time.

Kicker

SpaceX's next Starship V3 launch attempt is planned for early next week, Musk said in the X post announcing Thursday's abort, after two Raptor engines are removed and replaced.