Baidu Unveils New AI Chatbot, Stock Goes On A Rollercoaster Ride

Key takeaways

• Chinese tech company Baidu unveiled its Ernie AI chatbot in a bid to corner the Chinese market
• Baidu shares plummeted up to 10% during the launch, where users and investors alike weren’t impressed with the pre-recorded answers
• However, the stock hit highs of 14.3% on Friday after it announced 30,000 businesses had signed up to try the new service

Chinese search and ads business Baidu has had a crazy 24 hours. After being well-positioned to become a market leader in AI after years of investment in the sector, the much-anticipated launch of its AI chatbot, Ernie, underwhelmed audiences and investors.

Throwing down the gauntlet for other Big Tech companies fell flat on its face, as the stock sank 6.4% by the end of the day. However, the share price quickly bounced back to highs of 14.3% thanks to solid uptake from China’s business community. Does anyone else have whiplash?

Let’s get into the details.

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Baidu’s Ernie bot launch

After Baidu announced it would launch its own AI chatbot last month, expectations were high. It’s one of the largest tech companies in the world, so it’s well-placed to position itself as the leader in Chinese artificial intelligence.

Baidu is said to have diverted a lot of internal resources to build Ernie since OpenAI’s ChatGPT took the world by storm late last year. The company has previously invested in its AI capabilities over the years, though it seems to have also been surprised by OpenAI’s advanced model.

During the presentation, CEO Robin Li admitted the company was catching up. “So why are we unveiling it today? Because the market demands it,” he said. He was also keen to focus on collaboration rather than separatism. “Ernie Bot is not a tool of confrontation between China and the United States,” Li commented.

Ernie will be made available to Baidu enterprise users before being rolled out to the public in due course. 650 companies had already started using Ernie before the launch.

While the launch used the Ernie chatbot to generate a corporate slogan, create an image from text and solve complex math, the answers at the launch were pre-recorded instead of live.

It quickly gave the impression Baidu still had a long way to go in producing a viable AI chatbot.

How did Baidu’s stock fare?

The unveiling failed to impress WeChat livestream viewers, of which over two million had tuned in. Some lamented the lack of live features demoed at the launch and offered rolling commentary on Baidu’s falling stock price as the demonstration continued.

While the launch was very hyped up beforehand, the pre-recorded answers had Chinese consumers and analysts doubting whether Ernie was as ready as Baidu said.

The markets responded accordingly. Baidu’s Hong Kong shares fell 6.4% in value after the demonstration, at one point falling as much as 10%.

The company also failed to provide a timescale for the wider public rollout, much like Google has contended with in recent weeks with its Bard chatbot and AI integration into its suite of apps.

But was that the end of the Baidu stock story? Apparently not.

Why is Baidu stock up today?

Baidu stock then saw a reversal in its fortunes and pulled off an enormous rally to hit highs of 14.3% during Friday trading on the Hang Seng Index.

The turnaround is due to the company stating that 30,000 companies had signed up to test the Ernie chatbot while its website traffic had shot up. Given China has banned access to ChatGPT and Bing’s chatbot, this is the first time Chinese businesses will have access to the revolutionary new technology.

Initial feedback on the live version of the Ernie bot, which the demonstration didn’t use, has also been strong. These two factors have reassured investors that the company is well on its way to real AI capabilities.

Baidu stock is now the biggest winner on the HSI after being the biggest loser the day before. Talk about a rollercoaster!

Where does Baidu fit into the AI wars?

It was a tough week for Baidu to launch Ernie. It was also up against the much-anticipated unveiling of OpenAI’s GPT-4 earlier this week, where its early release has wowed users.

The much-anticipated upgrade follows OpenAI’s successful launch of ChatGPT, which has put Big Tech on high alert since its runaway success resulted in the company being the fastest ever to hit 100m users.

Microsoft, which made a $10bn investment in OpenAI at the start of the year, has said its Bing search engine runs on GPT-4 technology. The tech giant’s share price has risen 9.94% in the last five days.

Regarding US stock comparisons, Baidu’s underwhelming launch echoes Google’s just weeks before. $100bn was wiped off the company’s value after viewers found a mistake in the marketing material for its Bard chatbot.

However, the news that it would be integrating its AI technology into the Workspace suite of apps, including Docs, Sheets and Chat, has increased the stock price by 8.84% this week.

How are Chinese AI stocks performing?

Baidu isn’t the only Chinese tech giant to throw its hat into the AI ring. Alibaba and Tencent are also said to be developing AI technology. The former’s stock price is up slightly on Friday by 1.24%.

However, China’s hard-line take on AI could affect these stocks. Last month’s Chinese newspaper editorial warned that “some market capitals are keen on false concept speculation, luring investors to chase the market, and finally end up with losing. Investors must not follow the trend.”

At the time of writing, Baidu shares fell 3.7% while facial recognition software company CloudWalk Technology fell 9.4%.

It could be a sign that even though Chinese companies are pressing ahead with their AI tech development, a crackdown from the state could be on the cards. While investor sentiment is currently positive, any word from the Chinese regulators could stop the party in its tracks.

Investors will be looking closely at any further indications China intends to regulate AI development with keen interest.

The bottom line

OpenAI’s launch of ChatGPT doesn’t just have US tech companies scrambling to catch up. With Baidu’s chatbot not available to the public for some time yet, OpenAI’s ChatGPT and GPT-4 models are still the market leaders in this field.

But Robin Li was optimistic about the future of Ernie. While he said there were “obvious errors” with the chatbot, “[One] thing is for sure, it’s advancing very fast.”

Now the major players worldwide are racing against each other to come out on top in this exciting new market, we could see further daily stock price highs and lows as the announcements keep flooding in. Watch this space.

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