Yang Zhilin, the rock star founder behind China’s Moonshot AI

Following the breakout global success of Chinese AI lab DeepSeek’s R1 model early last year, Yang Zhilin faced what many believed would be an existential test for his start-up Moonshot AI.

The bespectacled 34-year-old founder had failed to capitalise on the early popularity of Kimi, his company’s chatbot, which was plagued by outages and rapidly overtaken by larger rivals. At the same time, he was contending with a lawsuit from an investor in a previous venture and reports that he and a co-founder sold shares in Moonshot during an early fundraising round. The company denied the reports, which brought unwelcome scrutiny.

Many in China’s AI industry questioned whether Moonshot could survive the brutal and expensive race to build frontier large language models. In 2024, the start-up had made just $2.4mn in revenue, while its costs from model training and hiring researchers were exploding, according to one investor briefed on the numbers. Rivals including Baichuan and 01.ai had already abandoned the contest to focus on applications, and some wondered whether Yang would follow suit.

But after DeepSeek’s R1 release, Yang concluded that Moonshot had moved into commercialisation too early and decided to focus purely on model training, ditching efforts to market the Kimi chatbot. In another pivotal decision, he committed to open-sourcing Moonshot’s leading AI models, allowing users to download the systems and run them on their own hardware.

“If the top leader can’t make decisive calls, that won’t work,” Yang said in a 2024 interview with the Chinese press.

It was the start of a journey that culminated last week in the release of the company’s K3 model. The new arrival closes the gap with leading US models and has prompted panic about the rising capabilities of China’s AI, in an echo of last year’s “DeepSeek moment”.

Investors are now clamouring to get access to Moonshot. The company, which is gearing up for an initial public offering, is currently doing two rounds of…