Baidu’s ‘Ernie Bot’ AI Demo Disappoints Investors

siaidu inc. debuted China’s answer to ChatGPT via a taped video, disappointing investors hoping for a real-time demo of the country’s highest-profile entry in a race to dominate the transformative technology.

Billionaire founder Robin Li took to a stage in Beijing to unveil his company’s “Ernie Bot,” a watershed moment for a search leader that has struggled in recent years to revive growth. But instead of putting the service through its paces in real time, he spoke in a scripted video of interactions with the AI. Baidu shares fell 6.4 percent in Hong Kong, wiping out about $3 billion in value.

Thursday’s launch was supposed to be a watershed moment for China’s tech industry, lifting the lid on how artificial intelligence has advanced the world’s largest internet economy. The omission raises questions about Ernie’s ability to match OpenAI’s ChatGPT, which has impressed and worried users since its launch in November. Chinese AI efforts lag behind their U.S. rivals right now, though they should catch up over time thanks to massive data warehouses and fast-moving experience, according to industry pioneer and author of the best selling Kai-Fu Lee.

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“It seems pre-recorded and so far it’s all just Powerpoints. The demonstrations did not seem spontaneous,” said Yu Yingbo, chief investment officer at Shenzhen Qianhai United Fortune Fund Management Co. It’s all really vague and theoretical.”

Baidu will let consumers and cloud customers sign up for access to the AI ​​chatbot starting Thursday, but did not say when they would actually be able to use the service.

However, the Beijing-based company is seen as a leader in a race with the likes of Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to build a next-generation platform for the world’s largest online marketplace. Along with American names like Microsoft Corp. and Google are trying to harness the potential of so-called genetic artificial intelligence, after services like ChatGPT and OpenAI’s Dall-E demonstrated to the public the ability to create songs and videos and provide full responses on demand.

“I can’t say we are fully ready. Benchmarking Ernie Bot against ChatGPT, or even GPT-4, is a high bar,” Lee told reporters. “None of the big tech companies in the world have made it. Baidu is the first,” he said, adding that his own testing experience showed the product was “not perfect.”

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Thursday’s disappointment casts a pall over China’s ability to usher in a technology revolution that analysts say will eclipse the mobile era. Some of the questions asked in Baidu’s videos seemed basic and easy to use by standard search engine services, such as: “Which part of China is the author of the Three-Body Problem from?”

Many users took to Chinese social media to poke fun at the event, with one user calling it a “low-energy” debut.

Baidu and its Chinese peers will now have to contend with increasing U.S. restrictions on exports of American technology, including flagship Nvidia Corp processors. required to train artificial intelligence models. It’s unclear how they might affect growth in the long run, though experts like Lee predict that China may find substitutes or find solutions.

China’s online search leader has bet billions of dollars on artificial intelligence in a long-term effort to reinvent itself from an online marketing company to a deeper technology provider. The Ernie AI system – a large-scale machine learning model that has been trained on data for several years – will form the foundation of its own chatbot as well as other products, including an image generator.

Baidu plans to integrate Ernie Bot into all of its major operations, from its flagship search app to cloud computing and self-driving software. Partners from car manufacturers to news sites have also said they will use Baidu’s tool in their businesses.

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Integrating Ernie Bot with online search will likely reverse Baidu’s loss of ad market share, just as the company is benefiting from a rebound in sectors such as travel and healthcare, Macquarie analysts including Esme Pau wrote in a note of Tuesday. It has gained about 20% or more than $7 billion in market value this year, outperforming most of its Chinese peers on the Internet.

“Baidu is obviously the first. There will be other Chinese companies creating similar technologies and some startups,” Lee, the founder of Sinovation Ventures, told Bloomberg Television in an interview last week. But “we should also be clear that in China there are some other obstacles.”

Earlier this week, Baidu told some of its 40,000 employees to participate in a test run of Ernie Bot under confidentiality agreements, according to employees who received the invitation. Such tests could provide critical last-minute feedback to fine-tune the AI ​​before its release.

The consequences of a failed launch can be dire. Shares of Google owner Alphabet Inc. fell through in February after Bard answered it incorrectly during a demo, prompting concerns that he was technologically behind. This demo was also recorded.

On Wednesday, OpenAI unveiled a new language model underpinning its core ChatGPT, saying it will improve the tool’s accuracy and security.

Internally, Baidu executives believe Ernie Bot has reached the same level as ChatGPT when the latter debuted in November, but Ernie’s advantage lies in its understanding of Chinese language and culture, according to a person with knowledge of the matter. which he asked not to be identified discussing personal information.

In addition to accuracy concerns, Baidu and its domestic peers also need to make sure their AI bots don’t run afoul of Chinese regulators and censors. ChatGPT is not available directly in China, and online platforms including Tencent’s WeChat have shut down local developers who bundled the tool into their own services.

It’s too early to say whether Ernie Bot could rise to the level of WeChat or Alibaba’s dominant Taobao. While Baidu has struggled over the years to commercialize its AI technology in the mobile age, its biggest rivals have won over users with more consumer-friendly products.

“Stock movements indicate that investors are disappointed with the launch of Ernie Bot, as the demo was pre-recorded. There wasn’t much that was exciting from the launch,” said Willer Chen, senior analyst at Forsyth Barr Asia Ltd.

— With assistance from Jane Zhang, Charlotte Yang, April Ma and Low De Wei.

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