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Baidu stock rebounds after falling sharply in wake of demo of ERNIE chatbot, its ChatGPT-style service



Hong Kong
CNN
 — 

Shares in Chinese search giant Baidu rebounded sharply a day after it unveiled ERNIE Bot, its answer to the ChatGPT craze.

Its stock soared 14.3% on Friday in Hong Kong, making it the biggest winner in the Hang Seng Index

(HSI)
. They also gained 3.8% in New York during US trade Thursday.

A day earlier, Baidu

(BIDU)
was the biggest loser of the same index. Its Hong Kong shares fell 6.4% after a public demonstration of its bot failed to impress investors. Since February, more than 650 companies had joined the ERNIE ecosystem, CEO Robin Li said during the presentation.

The reversal came after the company said more than 30,000 businesses had signed up to test out its chatbot service within two hours of its demonstration.

“The high degree of enterprise interest is positive, and we expect Baidu to continue to capture China’s enterprise demand for generative AI,” Esme Pau, Macquarie’s head of China and Hong Kong internet and digital assets, told CNN.

She said the company’s shares were bouncing back Friday as some users, including analysts, shared positive feedback of their own experiences trying out ERNIE, which suggested the bot had more advanced capabilities.

Baidu Chairman and CEO Robin Li presenting the company's AI chatbot, ERNIE Bot, in Beijing on March 16.

During the presentation, Baidu showed how its chatbot could generate a company newsletter, come up with a corporate slogan and solve a math riddle.

But its stock slumped on Thursday because the demo was “pre-recorded, and not live, which makes investors skeptical about the robustness of the ERNIE Bot,” according to Pau.

Baidu’s demonstration also came just days after the launch of GPT-4, which “raised the bar for ERNIE,” she added.

GPT-4 is the latest version of the artificial intelligence technology behind ChatGPT. The service has impressed users this week with its ability to simplify coding, rapidly create a website from a simple sketch and pass exams with high marks.

Pau noted that Baidu’s shares were already “down modestly” before showing off its software on Thursday, highlighting pressure from investors who had raised expectations following the GPT-4 launch.

“ERNIE also does not have the [same] multilingual capability as GPT-4, and has yet to improve for English queries,” she said. “Also, the ERNIE launch did not provide sufficient quantifiable metrics compared to the GPT-4 launch earlier this week.”

Like ChatGPT, ERNIE is based on a language model, which is trained on vast troves of data online in order to generate compelling responses to user prompts.

Li said Baidu’s expectations for ERNIE were “close to ChatGPT, or even GPT-4.”

But he acknowledged the software was “not perfect yet,” adding it was being launched first to enterprise users. The service is not yet available to the public.

Baidu announced its chatbot last month. Some critics say the service will add fuel to an existing US-China rivalry in emerging technologies.

Li tried to shake off that comparison during the launch, saying the bot “is not a tool for the confrontation between China and the United States in science and technology, but a product of generations of Baidu technicians chasing the dream of changing the world with technology.”

“It is a brand new platform for us to serve hundreds of millions of users and empower thousands of industries,” he said.

Baidu says its service stands out because of its advanced grasp of Chinese queries, as well as its ability to generate different types of responses.

“ERNIE Bot can produce text, images, audio and video given a text prompt, and is even capable of delivering voice in several local dialects such as the Sichuan dialect,” the company said in a statement.

By comparison, GPT-4 is also able to analyze photos, but currently only generates text responses, according to its developer, OpenAI.

Baidu isn’t the only Chinese firm working on such technology. Last month, Alibaba

(BABA)
announced plans to launch its own ChatGPT-style tool, adding to the list of tech giants jumping on the chatbot bandwagon.

So far, Baidu has a first mover advantage in the space in China, according to analysts.

“Our view is ERNIE is three to six months ahead of its potential contenders,” said Pau.

— CNN’s Mengchen Zhang contributed to this report.

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