Baidu Inc. has seen significant increase in its stock this year despite growing skepticism about its ChatGPT-like bot – Ernie Bot. The Chinese search engine firm launched its bot last month, much to the disappointment of the market as it turned out the launch was pre-recorded.
While some traders think the gains being experienced will not last, the tech firm has maintained its rally, although its shares tumbled briefly by 6.4% in Hong Kong after the disappointing debut of the bot.
Also read: Google Faces Multi-Billion Dollar Lawsuit for Cutting Publisher Revenue
Bloomberg reports that traders are starting to increase their bets on the near-term downside. The percentage of its American depository receipts that have been sold by short sellers, at 2%, is the largest since November. The overall open interest of put contracts in Hong Kong is very close to a record, according to the report.
On both the Nasdaq Golden China Index and Hang Seng Tech Index, Baidu is among the top 10 best performing companies and has gained of more than 30% this year, which has occurred in both the US and Hong Kong.
Positive sentiment driving growth
Strong full-year earnings as well as Beijing’s policy backing have boosted sentiment as well as the government has started a project to advance AI research and integration, and the official media outlet People’s Daily has urged for the industry to grow more quickly. The National People’s Congress in March saw high-ranking lawmakers stress the necessity of further “digitalizing” the economy.
According to Bloomberg, big tech stocks have generally powered gains for the Nasdaq 100 this year rising 20% in the 3 months to March 31, helping the tech-heavy gauge outperform broader indices like the S&P 500, which gained 7% and Russell 2000, which gained 2.3%.
Now that the company is not likely to generate revenue from the AI anytime soon, skeptics are of the view that the market’s obsession on AI has reached unhealthy levels.
While the bot is expected to promote long-term development, experts also advise the need to be cautious.
“There may be numerous problems that need to be resolved. For a few years, we don’t really see (how Baidu’s ChatGPT) can be profitable. Even with perfect technology, it still requires some time to develop,” said Morningstar expert Kai Wang.
Baidu too slow to capitalize on the opportunity
However, there are also fears Baidu is running out of time with its Ernie Bot as competition is already hitting up for ChatGPT rival products on Asian markets.
Already, Tencent Holdings, Alibaba Group and NetEase have all declared intentions to introduce their own ChatGPT-like AI tools.
Tencent president Martin Lau mentioned the company was developing a ChatGPT style tool during their latest earnings call, saying the chatbot will be one of many applications the company is preparing to launch. He added the company does not see ChatGPT as a “business threat” that it needs to tackle immediately.
Peers – NetEase said its subsidiary – Youdao is soon expected to launch its ChatGPT like model for educational scenarios. The model is named “Confucius Quotes (Zi Yue)”.
More pressure for the firm
But that’s not all the woes Baidu is likely to face. Shares are also under margin pressure as a result of US limitations and significant R&D costs.
Japan announced recently that it would increase export restrictions on more than two dozen different kinds of cutting-edge chip-making technology as the US intensifies efforts to deny China access to critical semiconductor know-how.
The decision which came ahead of a weekend visit to Beijing by Japanese Minister for Foreign Affairs Yoshimasa Hayashi, has been seen as a major win for the US, which in October announced sweeping restrictions on access to chipmaking technology to slow China’s technological and military advancements.
Already, Baidu’s chatbot started on a bad note yet the market had for some time waited for it as China’s first answer to OpenAI’s popular ChatGPT. Co-founder Robin Li took to a Beijing stage to introduce Ernie Bot mid-March in what was supposed to be a landmark moment.
But instead of putting the service through its space in real time, he talked over a scripted video interaction with the AI, disappointing the market and raising questions over its ability to match OpenAI’s ChatGPT which impressed and worried users since its launch in November last year.
and then