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Baidu Soars After Analysts Give Ernie a Thumbs-Up After Test-Run

(Bloomberg) -- Baidu Inc. surged more than 14% Friday after brokerages including Citigroup tested the company’s just-unveiled ChatGPT-like service and granted it their preliminary approval.

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Baidu’s leap reversed a 6.4% loss on Thursday after founder Robin Li debuted China’s answer to ChatGPT via recorded video, disappointing investors hoping for a real-time demo of the country’s highest-profile entry in a race to dominate the technology.

Artificial intelligence is now a critical area of US-China competition, and Baidu is seen as the frontrunner in this field from China’s tech sector. Its product, which the company calls Ernie Bot, is closely watched as a gauge of how China’s offerings stack up against those from Alphabet Inc. and ChatGPT maker OpenAI Inc. The disappointment of the launch event was swept aside by the positive analyst reviews.

“We tried testing ERNIE Bot for a few tasks like advice, analysis, paper writing, picture generation and we are satisfied with the results,” said Bank of America analysts including Miranda Zhuang in a note. Their sample size was small and may not have been representative, they added, but “the product is not static but continuous learning and improving.”

In a meeting on the day of the launch, Citigroup also put Ernie through its paces and found that, while it wasn’t perfect, it could answer the majority of complicated or absurd questions put forward, analysts including Alicia Yap wrote.

Baidu’s shares gained their most on an intraday basis in over a month, driving a rally of between 8% and 15% in AI-linked stocks including SenseTime Group Inc., chip designer Cambricon Technologies Corp. and Arcsoft Corp.

Some of the questions in Baidu’s own debut videos appeared rudimentary and addressable by conventional search engines, 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 the event, with one calling it a “low-energy” debut.

Read more: Baidu Surge as Analysts Positive After Bot Demo: Street Wrap

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 of a live demo raised 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 experience with rapid rollouts, according to industry pioneer and bestselling author Kai-Fu Lee.

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

(Updates with analyst comment from fourth paragraph)

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