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What’s with Ernie? Baidu stock after chatbot release

Chinese internet giant Baidu announced its own version of an AI chatbot that is going to compete with ChatGPT. The name of our new Chinese e-pal is Ernie (the name stands for Enhanced Representation from kNowledge IntEgration) and he probably knows Chinese much better than his OpenAI counterpart. That sounds like great news for the large market but after the presentation Baidu stocks plummeted in value. Why did it happen and what’s next? Let’s try to find out.

It’s a well-known fact that Baidu has been working on AI technologies for a while. They’ve planned for this mid-March chatbot release for months. And, of course, Ernie couldn’t avoid comparison with ChatGPT especially as its one-hour presentation was intercepted by the unexpected release of OpenAI’s GPT-4. Investors (just like all of us) are well acquainted with ChatGPT skills, so people were expecting something similar. But instead of showcasing Ernie through a live demo, Baidu offered the viewers of the presentation a prerecorded video of Ernie’s answers and announced that in the early going the chatbot would be available only to a narrow circle of users. For now, Ernie is only available for testing through invitation and others need to get on a waitlist. Industry observers inside and outside China pointed to these facts and we have to say the majority finds them really disappointing.

This news sent Baidu stock price tumbling downward. But you shouldn’t forget that there are various events which can affect the market, industries and companies. To keep track of them, you can use tools like economic calendar. It will alert you about major economic events.

Baidu’s investors were shocked, but the downward trend didn’t last long. Over the next few days, stocks recovered and later continued their growth.

It’s likely that this happened due to the investors believing that Baidu stocks have great potential. A month ago, the company dropped a better-than-expected report. In Q4 2022 the Chinese giant exceeded estimates on earnings per share and also sales, which turned out to be on the same level as Q4 2021 despite multiple tight Covid-19 restrictions in many regions of China. Moreover, Baidu announced the evaluation of its buyback program. All of these elements have given a rise to a number of positive opinions about the future of Baidu stock.

One more important thing is the general view on the Chinese economy. It’s likely to grow after easing off the Covid restrictions. So, it might be a great driver not only for Baidu but for lots of Chinese companies. While the world economy, for the most part, has fallen on hard times, its individual elements (economies of regions) are finding new ways to develop.

All the above mentioned aspects developed a consensus forecast by analysts all around the world. It lets us assume that Baidu stocks might rise by 21% in the next 12 months. Though, Ernie still needs to possess better communication skills. He has much more to learn.

But if you decide to buy or sell any investment asset, you shouldn’t rely only on the opinions of analysts, Ernie or ChatGPT. You need to carry out your own analysis before every trade – that’s how you will achieve success.




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