Baidu's newest AI model Ernie 4.0 fails to wow investors, but analysts maintain ‘buy' ratings

Analysts are optimistic about Baidu's latest version, Ernie 4.0, of a generative artificial-intelligence model.

Baidu's stock did not respond positively to this news.

Baidu's Hong Kong listed shares closed 1.65% below Tuesday's Hang Seng Index, despite the Hang Seng Index increasing by 0.75%. Overnight, its Nasdaq listed shares fell 4.12%.

Analysts are bullish about Chinese tech giant

Baidu

Investors did not respond positively to's latest version Ernie 4.0 of its generative AI model.

Citi analysts said in a report that they were "positively impacted" by the launch of Ernie 4.0, which was announced on Tuesday.

Analysts maintained a "buy rating" at a price target of $182. CEO Robin Li announced that all apps in the Baidu ecosystem would be rebuilt with deeper AI integration.

Li, during Baidu World 2023 said: "This version is the most powerful Ernie foundation model, upgraded to its fullest, with the ability [of] understanding the generation reasoning and memory."

Li showed Ernie 4.0 at the annual flagship conference of his company. He demonstrated its ability to create a real-time martial arts novel, create videos and posters with prompts, as well as plan a trip itinerary.

Jefferies analysts said in a report on Tuesday that Ernie 4.0 has a significant improvement [in comprehension, generation, reasoning, and memory] abilities, with a 3.6x increase in the training algorithm. They maintained a "buy' rating with a price target of $216.

Chinese tech giant claims Ernie 4.0 is on par with ChatGPT maker OpenAI GPT-4. Li said that the bot is now comparable to GPT-4, a model created by ChatGPT maker OpenAI.

Baidu releases Ernie first

On March 16, a small group of users will be able to download version 3.0.

The company released the 3.5 version of its software in June and claimed that

Ernie 3.5 is superior to ChatGPT

GPT 4 is a key component in a number of areas.

It is officially called

Open access to the public

on Aug. 30 after getting government approval.

CNBC reported that "Baidu’s announcement that it is now at par with GPT-4 represents a significant landmark for the Chinese technology giant," Xiaolin Chen said, who is head of international, KraneShares.

She did, however, point out that AI models' efficacy can vary depending on the specific tasks and use cases.

"Evaluating Ernie in a variety of different applications will help us make a comprehensive comparison to other models." Chen also noted that direct comparisons between AI models are difficult due to the different methods and benchmarks used in testing.

Investor sentiment down

Investors, however, did not respond positively to this development.

Baidu shares listed in Hong Kong

Closed 1.65% lower Tuesday, underperforming the Hang Seng Index's 0.75% rise. Its

Nasdaq listed shares

Sliding 4.12%

Kai Wang, Morningstar Asia's senior equity research analyst, wrote: "We think that investors are still concerned about long-term concerns such as how Baidu is going to deal with chip sanction and other risks that may impede the development of its AI business. These issues were not addressed in CEO Robin Li's speech."

The conference was more about highlighting the capabilities of the model than providing an update on Baidu's long-term strategy for AI, as the company lacked new guidance.

Memory chips with high performance are required for large language models like ChatGPT and Ernie. These chips allow generative AI models, such as ChatGPT and Ernie, to remember past conversations and user preferences to generate humanlike responses.

On Tuesday,

The U.S. has banned exports

China is importing more AI chips including the Nvidia H800.

Washington

Tightened Rules

The aim is to limit China's capability to manufacture or obtain high-tech semiconductors. Washington fears that China will use high-tech semiconductor chips to enhance its military capabilities.

Michael Bloom, a CNBC reporter, contributed to this article.