'Late to the fair': Baidu shares plummet after weak debut of new AI model

Shares of one of China's largest Internet companies, Baidu, lost almost 10% in Hong Kong trading after the new and expected by the market version of its artificial intelligence model Ernie 5.0 did not impress investors, Bloomberg writes. Quotes showed the strongest daily decline in seven months.

Shares of Internet search engine Baidu, which is called China's Google, fell at trading in Hong Kong on November 14 by 10%, the maximum collapse for the company in seven months, Bloomberg calculated. By the close, the securities recouped some of the losses. The company's depositary receipts in New York were losing about 1.5% at the pre-market.

Baidu on Nov. 13 unveiled an update to its flagship AI model Ernie 5.0, a multimodal system that processes and generates text, image, audio and video in a single stream. But the lack of wow effect disappointed markets amid a sharp rise in Baidu's shares, which, despite the drawdown, are still trading in the plus side by more than 40% relative to the beginning of the year, the agency points out.

The Baidu stock sell-off came amid a slowdown in the global rally in AI-related stocks. It is losing strength due to doubts about the overvaluation of AI companies and high costs of technology development, Bloomberg recalls. Meanwhile, Baidu is trying to catch up with competitors, from new player DeepSeek to giant Alibaba, which is now preparing an update to its main AI mobile app to bring its functionality closer to ChatGPT, the agency notes.

In an interview with local press after the presentation of the new model, Baidu founder Robin Li commented on the remarks about lagging behind: "When people say that we started early but came later than others, it's not an insult, it's true to some extent. I have even asked employees internally to discuss why it is that we got up early but came to the fair late." He emphasized that not every attempt at innovation can be successful. The peculiarity of innovation is that most of them are doomed to failure, Li said. "There could be ten different innovation projects at Baidu, and if nine of them fail, that's absolutely normal. They are bound to fail, that's the probability. If one project succeeds, that's a very good thing," he added.

According to Bloomberg Intelligence analyst Robert Lee, while Ernie 5.0 "boasts impressive capabilities, the model doesn't stand out enough from the competition." He suggests that "the updated AI lineup is unlikely to significantly change the outlook for the company's financial results, which remain extremely unfavorable."

Deutsche Bank upgraded Baidu from "hold" to "buy" last week, expecting artificial intelligence to push its stock higher. Analyst Leo Chiang named four main drivers for the company: the AI Cloud cloud computing platform, the Apollo Go robotaxi platform, the development of intelligent Internet search, and the production of AI chips, which is being handled by Baidu's Kunlunxin subsidiary. For all these areas, the AI model is the technological foundation.

Analysts generally maintain a positive view of Baidu, with 23 recommending buying its securities, nine advising a hold, and only one thinking they should be sold, according to MarketScreener.

This article was AI-translated and verified by a human editor