Baidu’s Shares Slid 11.5% after Reports Link its AI Model with the PLA
On Monday, China’s leading tech and AI giant, Baidu (NASDAQ: BIDU), experienced an 11.5% decline in its stock price in Hong Kong following reports suggesting potential connections of their large model Ernie with the People’s Liberation Army (PLA). The report raised concerns among investors due to the possibility of the US government imposing sanctions against Baidu. The company has denied the report.
Baidu Records Worst Trading Session Since Late 2022
Shares of Chinese internet giant Baidu plunged more than 11.5% on Monday after a research report implied that the company’s large language model was used in an experiment involving the People’s Liberation Army, China’s principal military force.
The stock closed the session 11.53% lower at HK$100.50, marking its worst single-day performance since late 2022.
Citing a recently released research paper, the South China Morning Post (SCMP) reported that a laboratory affiliated with the PLA’s Strategic Support Force conducted tests of an experimental AI system using several large language models (LLMs), including Baidu’s Ernie. The tech giant denied any business collaboration with the paper’s authors and issued a press release saying it had not offered any specialized services for the testing.
Baidu also said that Ernie was available for use by the general public, adding that testing stated in the paper was performed using prompts available to any other general user.
Why Have Investors Reacted to Baidu’s Potential Links to the PLA?
The SCMP’s report caused a sell-off in Baidu’s Hong Kong shares. It raised concerns that the company’s potential association with the PLA could lead to sanctions from the US authorities, particularly as both countries explore military applications of AI technology.
Baidu released Ernie just a few months after OpenAI’s ChatGPT took the world by storm, causing a frenzy around generative AI. The company had already monetized Ernie by late 2023, resulting in more robust Q3 sales.
However, the Chinese AI market has been facing headwinds recently, especially since the US banned the export of high-end AI chips to Chinese entities. Nvidia, one of the key players in the ongoing AI boom, is prohibited from selling its latest chips in China.
Apart from the research report, investors are also concerned about Baidu’s prospects amid China’s sluggish economic recovery. Notably, investors believe Ernie faces a long road ahead before it begins yielding enough revenue to offset the overall decline in online advertising.
Do you think the research paper alleging Baidu’s links to the PLA could trigger a response from the US regulators? Let us know in the comments below.
Disclaimer: The author does not hold any securities discussed in the article.
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