Baidu shares rebound after falling sharply following ChatGPT-style bot demo | CNN Business

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

Its shares soared 14.3% on Friday in Hong Kong, becoming the biggest gainer on the Hang Seng Index (HSI). They also gained 3.8% in New York during US trading on Thursday.

A day earlier, Baidu (BIDU) was the biggest loser in 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 investment came after the company said more than 30,000 businesses had signed up to test its chatbot service within two hours of its demo.

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

He said the company’s stock rallied on Friday as some users, including analysts, shared positive feedback about their own experiences testing ERNIE, suggesting the bot had more advanced capabilities.

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

But its stock fell 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 the GPT-4, which “raised the bar for ERNIE,” he 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, quickly build a website from a simple sketch, and pass exams with flying colors.

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

“ERNIE doesn’t have either [same] multilingual capability like GPT-4, and still needs to improve for English queries,” he said. “Furthermore, the ERNIE release did not provide enough quantifiable metrics compared to the GPT-4 release earlier in ‘this week”.

Like ChatGPT, ERNIE is based on a language model, which is trained on large amounts of online data to generate convincing responses to user requests.

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

But he acknowledged that the software “wasn’t perfect yet,” adding that it was being rolled out to business users first. The service is not yet available to the public.

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

Li tried to undo 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 pursuing the dream of changing the world with technology.”

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

Baidu says its service stands out for its advanced knowledge of Chinese queries, as well as its ability to generate different types of answers.

“ERNIE Bot can produce text, images, audio and video with a text message, and is even capable of providing voice in various local dialects such as the Sichuan dialect,” the company said in a statement.

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

Baidu is not the only Chinese company working on this 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 that ERNIE is three to six months ahead of its potential competitors,” Pau said.

— CNN’s Mengchen Zhang contributed to this report.