China’s answer to ChatGPT? Baidu shares tumble as Ernie Bot disappoints

BEIJING/HONG KONG, March 16 (Reuters) – China’s Baidu on Thursday unveiled its long-awaited AI-powered chatbot known as Ernie Bot, but disappointed investors with its use of pre-recorded videos and lack of a public launch. his shares tumble.

The just over an hour long presentation, which came two days after Alphabet Inc’s (GOOGL.O) Google unveiled a suite of AI tools for its email, collaboration and cloud software, gave the world a glimpse of what its biggest rival from China could be ChatGPT from the American research lab OpenAI.

But unlike ChatGPT, which launched last November as a free-to-use chatbot for the public, Baidu limited the presentation to short videos of Ernie performing math calculations, speaking in Chinese dialects, and generating a video and image with text prompts.

It won’t be open for a trial until Thursday for an initial group of users with invite codes, while companies can apply to integrate the bot into their products through Baidu’s cloud platform, the company said.

Baidu’s Hong Kong shares (9888.HK) fell as much as 10% as CEO Robin Li spoke, eventually closing 6.4% lower, shaving more than $3 billion off the Chinese search giant’s market valuation.

“It seems the presentation was more of a monologue and script than an interactive session that people were looking for. There was also no soft launch date which was likely to lead to negative feelings,” said Kai Wang, a Morningstar analyst.

Baidu is seen as a leader in a race in China between tech giants and startups to develop a rival to Microsoft (MSFT.O) ChatGPT, which took the world by storm after showing off the power of so-called generative AI, which text, images and other content based on historical data.

The company’s Ernie bot is based on the AI-driven deep learning model Ernie – short for “Enhanced Representation through Knowledge Integration”.

During the presentation at Baidu’s headquarters in Beijing, which was also streamed across nine platforms, Li warned that it wasn’t perfect. “So why are we revealing it today? Because the market demands it,” he said.

Baidu did not immediately respond to a request for comment on the share drop, but released a statement after the presentation saying that more than 30,000 business users had signed up to test Ernie Bot’s business edition API and that traffic on Baidu’s cloud website soared.

“After the release of ChatGPT, only Baidu has made a benchmark product among the major technology companies in the world,” it said.

NATIONAL CHAMPION

Charlie Chai, an analyst at 86Research, said that while the event was clearly a disappointment to many who had seen it as a trading catalyst, he still considered Baidu the best bet in China’s AI space.

“We continue to advise investors to patiently hold BIDU stock as the top ‘national champion’ game in China’s (semi-segregated) AI space,” he said.

Baidu has touted its years of heavy R&D investment in artificial intelligence and deep learning, saying it plans to use Ernie Bot to revolutionize its search engine and increase efficiencies in the cloud, smart cars and home appliances.

Earlier this week, OpenAI said on Tuesday that it is beginning to release a powerful artificial intelligence model known as GPT-4, describing it as “multimodel,” meaning that both images and text prompts can nudge it to generate content.

Li nodded at GPT-4 during his speech, saying it surprised him with its ability to summarize information, but cautioned against seeing it through the lens of geopolitics.

“Ernie Bot is not an instrument of confrontation between China and the United States,” he said.

To date, 650 companies have said they will join the Ernie ecosystem, he added.

Reporting by Eduardo Baptista in Beijing; Additional reporting by Josh Ye in Hong Kong and Jason Xue in Shanghai; Written by Brenda Goh; Edited by Muralikumar Anantharaman, Kenneth Maxwell and Kim Coghill

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