Baidu Dives After Pre-Recorded Demo of AI Chatbot Disappoints

(Bloomberg) — Baidu Inc. debuted China’s answer to ChatGPT in a pre-recorded video, disappointing those hoping for a stronger, real-life demo of the country’s highest-profile entry in a race with the US to dominate the transformative technology.

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Billionaire founder Robin Li took to a Beijing stage to introduce his company’s “Ernie Bot,” a landmark moment for a search leader that’s struggled in recent years to revitalize growth. But instead of putting the service through its paces in real time, he talked over a scripted video of interactions with the AI. Baidu’s shares fell as much as 10% in afternoon trading in Hong Kong, wiping out more than $4 billion of its value.

Thursday’s launch was to have been a watershed moment for China’s technology industry, lifting the lid on how AI has progressed in the world’s largest internet economy. The omission raises questions over Ernie’s ability to match OpenAI’s ChatGPT, which has both impressed and worried users since its November launch. Chinese AI efforts lag their US rivals at the moment, though they should catch up over time thanks to vast data hoards and their experience with rapid tech rollouts, according to industry pioneer and bestselling author Kai-Fu Lee.

“It looks pre-recorded, and so far it’s all just Powerpoints. The demos did not look spontaneous,” said Yu Yingbo, chief investment officer at Shenzhen Qianhai United Fortune Fund Management Co. “He’s not citing anything on the database they are drawing from, or their model, or how it compares to ChatGPT. It’s all really vague and theoretical.”

Baidu will let consumers and cloud clients register for access to the AI ​​chatbot starting Thursday, but didn’t say when they could actually use the service.

Still, the Beijing-based company is regarded as a leader in a race with the likes of Alibaba Group Holding Ltd. and Tencent Holdings Ltd. to create a next-generation platform for the world’s largest internet market. They join US names such as Microsoft Corp. and Google in trying to tap the potential of so-called generative AI, after services like OpenAI’s ChatGPT and Dall-E demonstrated to the public the ability to create songs and videos and provide full answers on demand.

“I can’t say we are fully ready. Benchmarking Ernie Bot against ChatGPT, or even GPT-4, is a high bar,” Li told reporters. “None of the Big Tech firms globally has made it. Baidu is the first one,” he said, adding his own testing experience showed the product “isn’t perfect.”

Read more: China Can Quickly Catch Up to US AI, Says Venture Veteran

Thursday’s letdown casts a pall over the potential for China to contribute to a technological revolution analysts have said will dwarf the mobile age. Some of the questions posed in Baidu’s videos appeared rudimentary and addressable by typical search engine services, such as: “Which part of China does the Three Body Problem author come from?”

Many users took to Chinese social media to poke fun at Thursday’s event, with one user calling it a “low-energy” debut.

“The shares move show that investors are disappointed at the Ernie Bot release, as the demonstration was pre-recorded. There weren’t many things that were exciting from the launch,” said Willer Chen, senior analyst at Forsyth Barr Asia Ltd.

Baidu and its Chinese peers will now have to contend with growing US restrictions on the export of American technology, including the highest-end Nvidia Corp. processors needed to train AI models. It’s unclear how those might impact development in the longer run, though experts like Lee anticipate China will come up with substitutes or find workarounds.

China’s internet search leader has bet billions of dollars on AI in a long-term quest to reinvent itself from an online marketing firm to a provider of deeper technology. Its Ernie AI system – a large-scale machine-learning model that’s been trained on data over several years – will be the foundation of its own chatbot as well as other products including an image generator.

Baidu is planning to embed Ernie Bot into all of its main operations, from its flagship search app to cloud computing and autonomous-driving software. Partners from car-makers to news sites also said they’ll use Baidu’s tool in their businesses.

Integrating Ernie Bot with online search will likely reverse Baidu’s ad market share loss, just as the company benefits from a recovery in sectors like travel and healthcare, Macquarie analysts including Esme Pau wrote in a Tuesday note. It has gained roughly 20% or more than $7 billion in market value this year, outperforming most of its Chinese internet peers.

“Baidu is obviously the frontrunner. There will be other Chinese companies that will build similar technologies and a few startups,” Lee, the Sinovation Ventures founder, told Bloomberg Television in an interview last week. But “we should also be clear that in China, there are a few other obstacles.”

Earlier this week, Baidu told some of its 40,000 workers to participate in a trial run of Ernie Bot under confidentiality agreements, according to employees who got the invitation. Such testing could offer crucial last-minute feedback to fine-tune the AI ​​before its rollout.

The consequences of a botched launch could be dire. Shares of Google owner Alphabet Inc. plunged in February after its Bard answered incorrectly during a demonstration, sparking concerns it had fallen technologically behind. On Wednesday, OpenAI unveiled a new language model underpinning its seminal ChatGPT, saying it will improve the accuracy and safety of the tool.

Read more: China Prepares to Police AI as ChatGPT Frenzy Spreads

Internally, Baidu execs think Ernie Bot has reached the same level of ChatGPT when the latter debuted in November, but Ernie’s edge lies in its understanding of the Chinese language and culture, according to a person with knowledge of the matter, who asked not to be identified discussing private information.

Apart from accuracy concerns, Baidu and its domestic peers also have to make sure their AI bots don’t run afoul of Chinese regulators and censors. ChatGPT isn’t available directly in China, and online platforms including Tencent’s WeChat have shut down local developers who plugged the tool into their own services.

It’s too early to tell whether Ernie Bot could rise to the level of WeChat or Alibaba’s dominant Taobao. While Baidu struggled over the years to commercialize its AI technology in the mobile era, its bigger rivals won over users with more consumer-friendly products.

“The development of AI technology is at a turning point, where it will inevitably change all kinds of businesses and industries,” Li told employees in February.

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–With assistance from Jane Zhang, Charlotte Yang, April Ma and Low De Wei.

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