Baidu’s Ernie 4.0 fails to wow investors; Citi, Jefferies keep buy ratings

Analysts are bullish on Chinese tech giant Baidu’s latest version of its generative artificial intelligence model, Arnie 4.0, but investors have not reacted positively to the development.

“Following several new product announcements, including the official debut of Arnie 4.0, we are I viewed it positively.”

“CEO Robin Li also announced that he will restructure all apps in the Baidu ecosystem with deeper integration of AI,” the analysts said, with a price target of $182. maintained its “buy” rating.

During Baidu World 2023, Li said: “This is the most powerful version of the Ernie Foundation model to date, fully featured and upgraded throughout.” [of] Understanding generational reasoning and memory. ”

At the company’s annual flagship technology conference, Lee said Ernie 4.0 will be able to create real-time martial arts novels, create prompted advertising posters and videos, plan travel itineraries, and solve complex math problems. I have proven it.

“Significant improvement [comprehension, generation, reasoning and memory] Arnie 4.0 has a 3.6x improvement in the training algorithm and we are seeing its capabilities,” Jefferies analysts said in a Tuesday report, maintaining a “buy” rating with a price target of $216.

The Chinese tech giant claimed that Ernie 4.0’s functionality is equivalent to ChatGPT maker OpenAI’s GPT-4 model. “It’s a huge improvement over the online version of Erniebot, and it’s comparable to GPT-4,” Lee told analysts, investors and journalists.

Baidu first released Ernie 3.0 to a limited number of users on March 16th.

The company released version 3.5 in June and claimed that Ernie 3.5 outperforms ChatGPT and GPT 4 in several key areas.

After receiving government approval, it was officially opened to the public on August 30th.

“Baidu’s statement of GPT-4 parity marks an important milestone for the Chinese technology giant,” Xiaolin Chen, international head of CraneShares, told CNBC.

However, she noted that the effectiveness of AI models can vary depending on the specific use case or task.

“Evaluating Arnie across a variety of applications will help make more comprehensive comparisons with other models. Also, the variety of techniques and benchmarks used in testing will It is also worth bearing in mind that direct comparisons may be difficult.” Chen.

However, investors did not react positively to this development.

Baidu’s Hong Kong-listed shares closed 1.65% lower on Tuesday, underperforming the Hang Seng Index’s 0.75% gain. The company’s Nasdaq-listed shares fell 4.12%.

“We believe investors remain concerned about long-term issues such as how Baidu deals with chip sanctions and other key risks that could hinder the further development of its AI business. But these were never brought up in CEO Robin Li’s presentation,” Kai Wang wrote. , Senior Equity Research Analyst at Morningstar Asia.

“Rather than providing an update on the long-term strategic direction of Baidu’s AI business, the conference focused on some of the model’s capabilities,” Wang wrote in the report. It was because there was a lack of guidance.”

Large language models such as ChatGPT and Ernie require high performance memory chips. Such chips allow generative AI models to remember details of past conversations and user preferences and generate human-like responses.

The United States on Tuesday banned the export of further AI chips to China, including the Nvidia H800.

The U.S. government last week tightened regulations aimed at limiting China’s ability to obtain or manufacture high-tech semiconductor chips. The US government is concerned that China will use such high-tech chips to improve its military capabilities.

– CNBC’s Michael Bloom contributed to this report.