Cheap Chinese AI Models Fuel Rebound in Software Stocks

A wave of cheap, open-weight AI models from Chinese companies is reshaping the economics for American software firms. Instead of being displaced by AI, many of those firms are seeing their stocks rebound as the cost of adding AI features plummets.

Chinese developers including Moonshot, DeepSeek, and Z.ai have released models that approach the performance of top American systems at a fraction of the price. Many are open-weight, meaning software companies can download key components, run them on their own infrastructure, and customize them without relying entirely on expensive outside providers.

That changes the math. Instead of paying a premium every time a customer asks an AI-powered question, software companies can choose from dozens of competing models. They can reserve expensive closed models for the hardest tasks and route routine work to cheaper open alternatives.

Developers are already making that switch. Vercel CEO Guillermo Rauch said open-weight models accounted for about 55% of tokens flowing through his company's AI Gateway in July, up from just 4% in January. The shift accelerated after the releases of DeepSeek V4, Z.ai's GLM-5.2, and Moonshot's Kimi K3. OpenAI, Anthropic, and Google still dominate spending, but their combined share has fallen sharply as developers experiment with cheaper alternatives, according to Vercel's AI Gateway data.

William Blair analysts argued recently that cheaper, more open AI models are “unambiguously good” for software companies because AI is simply another input cost. As those costs fall, profit margins improve, and companies can afford to add AI to many more products.

Software companies also gain more control by mixing and matching models rather than depending on a single supplier. Some download Chinese model weights and use them as the basis for entirely new AI models they own and control. Cursor has done this successfully, and other US companies are trying it.

As the new Chinese models appeared over the past month, enterprise software stocks rebounded after a brutal first half of 2026. HubSpot has soared almost 30% in the past month. Adobe is up more than 20%. Intuit, Salesforce, ServiceNow, and Asana have all gained at least 12%.

Instead of worrying that AI will replace software-as-a-service, a growing number of investors see software vendors benefiting from cheaper Chinese AI models rather than being displaced by them.

Former Benchmark partner Bill Gurley argues that startups, cloud providers, chip companies, enterprises, and researchers all benefit when powerful AI models remain open and inexpensive. For startups in particular, free models mean they can build AI products without paying a pricey toll every time a customer uses them, while avoiding dependence on any single AI supplier.

One of Silicon Valley's less-discussed realities is that many of today's “AI startups” are not building giant foundation models from scratch. They are building software that sits on top of existing models. Their competitive advantage comes from the customer experience, their industry knowledge, and the data they combine with AI – not from inventing the underlying intelligence.

Cheap Chinese open-weight models make these businesses dramatically more attractive by lowering one of the highest costs of adding AI features. That is good news not just for startups but also for the venture capital firms betting on them. If those models remain freely available, a much larger generation of software companies can afford to compete.

The balance of power in AI may be shifting. If intelligence becomes cheap and interchangeable, the real value shifts away from the model itself and toward the software built around it. The winners become companies with trusted customer relationships, unique data, and products people already use every day.

For at least a year, software companies worried AI would eat their lunch. Instead, thanks in part to an unexpected wave of cheap Chinese models, they may be getting the biggest discount in the industry's history.