Shares of Chinese AI model developers fell after a report that regulators have opened a probe into startups DeepSeek and Moonshot AI over data security concerns. Z.AI Co. and Mini Max Group Inc.'s shares declined as much as 12% and 6.8% in Hong Kong, respectively, after The Information's report. The US tech news outlet added that the probe began after Anthropic PBC's accusations that DeepSeek and Moonshot AI had been routing sensitive data through its Claude models.

Alibaba Group Holding Ltd., which develops the Qwen model, also slid nearly 5% following the report. The development adds to investor concerns that Chinese AI firms may face intensified scrutiny amid growing debate over AI safety. Expectations are mounting that President Donald Trump and his Chinese counterpart Xi Jinping will seek an agreement on the AI industry at their upcoming summit.

Investors are “afraid” that Beijing may heighten scrutiny of the industry, said Leonid Mironov, portfolio manager at Gavekal Capital. Sentiment has weakened as the scope of regulation remains unclear and may risk slowing China’s AI model development, he added. Chinese companies have been ramping up AI model development to strengthen their position, including Moonshot’s introduction of Kimi K3 and Alibaba’s Qwen3.8-Max.

Any regulatory slowdown may stall that progress, while US rivals, including Open AI and Anthropic PBC, are advancing products to better compete on price. Other Chinese technology companies with their own AI model also declined Wednesday, with Xiaomi Corp. and Tencent Holdings Ltd. falling about 3.8% and 2.9% respectively.