Baidu surges as hope mounts over Chinese answer to ChatGPT

Baidu Inc. surged after affirming it’s on track to publicly roll out its ChatGPT-like service in March, stoking anticipation around what is potentially China’s most prominent entry in the race to create lifelike AI bots.

The Hong Kong-listed shares had their best day since March, jumping 15% after the company said it was naming the service “Wenxin Yiyan,” or “Ernie Bot” in English. Baidu’s American depositary receipts also soared 15% in premarket trading. Baidu should complete internal testing in time for next month’s launch, it said in a statement.

News of Baidu’s foray into the red-hot generative AI arena has fired up Chinese AI-related stocks from Beijing Deep Glint Technology Co. to Cloudwalk Technology Co. in recent days. The mania reflects mounting interest from investors since OpenAI’s ChatGPT debuted, drawing eye-popping investments from the likes of Microsoft Corp. Beyond Baidu, a growing number of large and small companies are racing to try to overtake the startup in the suddenly hot world of AI services. 

China’s largest search engine company plans to initially embed Ernie into its main search services. The tool will allow users to get conversation-style search results much like OpenAI’s popular platform.

Baidu has spent billions of dollars researching AI in a years-long effort to transition from online marketing to deeper technology. Its Ernie system — a large-scale machine-learning model that’s been trained on data over several years — will be the foundation of its upcoming ChatGPT-like tool.

AI is a rare bright spot in a contracting, job-cutting tech industry. Generative AI companies — named for their ability to generate new content from digital troves of text, photos and art — are attracting vast sums of venture capital dollars. In 2022, they raised about $920 million in the US, according to PitchBook data, up 35% from the year before.

In January, Microsoft agreed to pour $10 billion in OpenAI, one of the largest startup investments ever. In addition, less than three months into 2023, multiple generative AI companies have raised or are in talks to raise upwards of $700 million cumulatively, according to reports of funding rounds. A running list maintained by the Homebrew AI Club, a group intended as a meeting place for AI workers, counts more than 150 startups in the sector. 

The ChatGPT theme has captivated global stock markets as well, driving up shares of anything AI related. Investors in Chinese equities have embraced the theme since the Lunar New Year holidays, even as the recent reopening-fueled rally in the broader market began to falter last week. 

The sharp run-ups in some shares have begun to show signs of strain, however, despite the good news from Baidu. Deep Glint Technology slid as much as 10% Tuesday, paring its rise for the year to 82%, while Guangdong TianYiMa Information Industry Co. tumbled as much as 7.2%.

“The market likes to speculate on far-fetched themes like this especially when there is a lack of new funds,” said Wu Wei, fund manager at Beijing Win Integrity Investment Management Co. “When it is just existing funds rotating within sectors, these trades are bound to go just as quickly as they came, leaving retail investors to pocket the losses.” –BLOOMBERG