Baidu’s newest AI model Ernie 4.0 fails to wow traders, but analysts maintain ‘purchase’ ratings

Analysts are bullish on Chinese tech large Baidu‘s newest model of its generative synthetic intelligence model, Ernie 4.0, but traders didn’t react positively to the event.

“We got here away positively following the announcement of a number of new merchandise together with the official debut of Ernie 4.0,” stated Citi analysts in a report, after Baidu introduced a “considerably improved” model of Ernie 4.0 on Tuesday.

“CEO Robin Li additionally introduced the rebuilding of all apps throughout the Baidu ecosystem with deeper AI integration,” the analysts stated, sustaining a “purchase” score at a goal value of $182.

During Baidu World 2023, Li stated: “This is essentially the most highly effective model of Ernie basis model to date, upgraded in its entirety, below the total capabilities [of] understanding era reasoning and reminiscence.”

At the corporate’s annual flagship tech convention, Li demonstrated Ernie 4.0’s skill to compose a martial arts novel in real-time, create promoting posters and movies with prompts, plan a visit itinerary in addition to clear up advanced math issues.

“A major enchancment in [comprehension, generation, reasoning and memory] capabilities is seen in Ernie 4.0, with 3.6x enchancment in coaching algorithm,” stated Jefferies analysts in Tuesday report, sustaining a “purchase” score with a $216 value goal.

The Chinese tech large claimed Ernie 4.0′s capabilities are on par with these of ChatGPT maker OpenAI’s GPT-4 model. “It has been considerably improved in contrast to the net model of Ernie bot and now it isn’t inferior to GPT-4,” Li advised an viewers of analysts, traders and journalists.

Baidu first released Ernie 3.0 on March 16 to a restricted pool of customers.

The firm launched the three.5 model in June, and claimed that Ernie 3.5 outperformed ChatGPT and GPT 4 in a number of key areas.

It formally opened access to the public on Aug. 30 after getting authorities approval.

“Baidu’s assertion that it’s now on par with GPT-4 marks a major milestone for the Chinese tech large,” Xiaolin Chen, head of worldwide at KraneShares, advised CNBC.

However, she identified that the efficacy of AI fashions can range relying on particular use instances and duties.

“Evaluating Ernie throughout a various vary of purposes can be instrumental in making a extra complete comparability with different fashions. It’s additionally price noting that direct comparability between totally different AI fashions might be difficult, due to the varied strategies and benchmarks employed in testing,” stated Chen.

Baidu’s Hong Kong-listed shares closed 1.65% decrease on Tuesday, underperforming a 0.75% improve within the Hang Seng Index. Its Nasdaq-listed shares slid 4.12%.

“We imagine that traders stay involved over long-term points akin to how Baidu will cope with chip sanctions and different key dangers that might impede additional improvement of the agency’s AI enterprise, which had been by no means addressed throughout CEO Robin Li’s presentation,” wrote Kai Wang, senior fairness analysis analyst at Morningstar Asia.

“The convention highlighted among the model’s capabilities moderately than giving an replace on the long-term strategic path of Baidu’s AI enterprise as there was a scarcity of latest steerage for the enterprise,” stated Wang in a report.

Large language fashions akin to ChatGPT and Ernie require high-performance reminiscence chips. Such chips allow generative AI fashions to keep in mind particulars from previous conversations and consumer preferences so as to generate humanlike responses.

On Tuesday, the U.S. banned exports of extra AI chips, together with Nvidia H800, to China.

Last week, Washington tightened rules aimed toward limiting China’s skill to receive or manufacture high-tech semiconductor chips. Washington is worried that China would use such high-tech chips to advance its navy capabilities.

– CNBC’s Michael Bloom contributed to this report.