China AI software and cloud-focused ETFs had a strong July, benefiting from the release of Moonshot AI’s Kimi 3 Large Language Model. CFRA continues to be bullish on the U.S. hyperscalers, but the success of China’s open-weight models gives investors more diversification options in the AI model and cloud computing trade. Kimi 3 Likely to Spur Cloud Demand and Drive Operational EfficienciesWhile Kimi 3 is a threat to the model businesses of the Chinese AI firms held in KWEB, this impact will be offset by external cloud demand and internal AI adoption. Open-weight models should be a useful tool in that development and growth process through coding assistants and AI-assisted content creation. The decision to allow downloadable model weights is proving to be a winning distribution strategy for the Chinese model providers.