Baidu, the Chinese tech giant, unveiled its improved generative artificial intelligence model, Ernie 4.0, at Baidu World 2023. The model, touted as significantly improved, demonstrated its prowess in real-time martial arts novel composition, creating advertising materials, planning trip itineraries, and solving complex math problems.
Analysts expressed bullish sentiments, with Citi analysts maintaining a “buy” rating at a target price of $182 and Jefferies analysts endorsing a “buy” rating at a $216 price target. Baidu claimed Ernie 4.0’s capabilities are on par with OpenAI’s GPT-4 model, marking a significant milestone. The model’s training algorithm saw a 3.6x improvement, and its comprehension, generation, reasoning, and memory capabilities were notably enhanced.
However, investors did not react positively to the development. Baidu’s Hong Kong-listed shares closed 1.65% lower, and its Nasdaq-listed shares slid 4.12%. Investor concerns center around long-term issues, including how Baidu will navigate chip sanctions and other key risks that could impact AI business development. The company’s conference highlighted the model’s capabilities without providing new guidance for the long-term strategic direction of Baidu’s AI business.
Additionally, the ban on exporting AI chips to China, including Nvidia H800, and Washington’s tightened rules on high-tech semiconductor chips raise concerns about Baidu’s access to essential components for models like Ernie. Large language models like Ernie and ChatGPT rely on high-performance memory chips to remember details from conversations and user preferences.
Washington’s restrictions aim to limit China’s access to advanced semiconductor chips amid concerns about military applications. Despite the positive sentiments about Ernie 4.0’s capabilities, these geopolitical challenges contribute to investor skepticism about Baidu’s AI business outlook.
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