Moonshot AI seeks 30% of the revenue generated by US clouds from Kimi K3.

      Moonshot AI is currently in preliminary negotiations with Microsoft, Amazon, and Google regarding the hosting of Kimi K3 on their cloud platforms, aiming for up to 30% of the revenue generated by these services, as reported by Reuters.

      This would establish a groundbreaking arrangement between a Chinese AI firm and major American cloud providers, utilizing a model that Moonshot has introduced as the largest open model globally, which caused significant market reactions when it debuted.

      The K3 model consists of 2.8 trillion parameters, making it open in terms of licensing but impractical for most organizations to host independently due to the immense computational resources required, which only a few companies can provide. Consequently, while the open weights eliminate the need for a specific cloud provider, they redefine the competitive landscape among cloud providers. Moonshot is able to gain distribution that it could not achieve on its own, while the hyperscalers acquire a model that has been performing impressively against American counterparts, with Arena.ai ranking K3 first for web interface tasks.

      However, much of the deal remains unresolved, including the revenue split, data access terms, and how token usage will be audited, which is essential for usage-based billing. The audit issue is more complicated than it may seem; both parties need to agree upon a method for counting the text units processed by the model, where the entity responsible for counting is also the one paying the agreed share.

      Data access is likely to be a crucial factor in the outcome. A Chinese company deploying a model on Azure or AWS raises immediate concerns about the visibility of the prompts and outputs, and enterprise clients will require clarity before processing any sensitive information.

      The political complexities are significantly more challenging than the financial ones. US Treasury Secretary Scott Bessent has suggested placing Moonshot on trade blacklists, with American officials accusing the company of illegally acquiring chips and copying other companies' models—claims that Moonshot has denied.

      The situation where three US cloud providers enter revenue-sharing agreements with a company that the Treasury Secretary intends to blacklist is not straightforward. The conclusion of these discussions may depend more on the political acceptability from Washington than on the specific terms of the agreements.

      For Moonshot, the timing is economically critical. The company is working towards a Hong Kong listing with a valuation of $30 billion, and gaining international distribution through the largest cloud providers would significantly enhance the revenue narrative presented to investors.

      The trajectory of its valuation is noteworthy. Moonshot achieved the $30 billion target following a sevenfold increase in just six months, a level of revaluation that necessitates urgency in securing distribution deals.

      The valuation has changed so rapidly that it requires justification; Moonshot went from approximately $20 billion to $30 billion in just around six months. A business model that sells access to Chinese clients alone has a limited ceiling compared to one that can leverage Azure, AWS, and Google Cloud.

      There’s also a sovereignty argument against the deal in Europe, where buyers have been encouraged to minimize reliance on foreign models for the past two years. A Chinese model hosted on an American cloud does not clearly address this concern, even if it might be the most cost-effective option.

      The hyperscalers have their own calculations to consider. Customers frequently seek cheaper yet effective models; K3 fits that demand. The alternative to hosting it would be for enterprises to find other ways to access it, which is the rationale that has previously driven decisions to adopt competitors’ models.

      While a 30% share might seem aggressive, it reportedly aligns with what Moonshot has been requesting from major clients and reverses the traditional model where the platform takes a cut and the developer receives the remainder.

      No agreements have been finalized, and all four companies have chosen not to comment beyond confirming the lack of further updates. Early-stage discussions, as reported by sources, are among the most likely negotiations to wrap up quietly, particularly those that necessitate resolution of a US policy issue beforehand.