Shares of Baidu, Inc. (HK:9888) declined by around 10% over news of a speculated military tie-up involving its AI platform, Ernie. According to a South China Morning Post report, a university affiliated with the People’s Liberation Army’s (PLA) Strategic Support Force conducted tests of its artificial intelligence (AI) system on Baidu’s Ernie. The report triggered concerns that the Biden administration might impose sanctions on Chinese companies to restrict such collaborations.
Baidu, however, has denied these allegations and stated that it had no knowledge of any such research project. The search engine giant added that the large language model (LLM) used in the project “would have been the version publicly available online.”
Baidu shares continued their downward trajectory from Friday and registered their biggest drop in over a year on Monday, as of writing. In 2023, the stock fell by around 8%.
Baidu is a Chinese technology company specializing in AI and other internet-related services.
Rising Concerns Over AI Ambitions
Ernie Bot (enhanced representation through knowledge integration) is Baidu’s AI chatbot service, which the company started developing in 2019, showcasing its commitment to advancing AI technologies. In 2023, Baidu launched Ernie, gaining the limelight in the ambitious and competitive AI market.
The report has sparked concerns that the U.S. might contemplate imposing sanctions, targeting Baidu on such partnerships to address the geopolitical competition between the two countries. The U.S. has already slapped stringent restrictions on the export of advanced AI chips to China, citing national security concerns.
Steven Leung from the Singapore-based brokerage firm UOB Kay Hian believes the current relationship between the U.S. and China is “still intense,” which led to the sell-off in Baidu shares, irrespective of the accuracy of the news. Analyst Julia Pan from UOB Kay Hian has a Buy rating on Baidu stock and predicts an upside of almost 70%.
Is Baidu a Good Buy Now?
According to TipRanks, 9888 stock has received a Strong Buy consensus rating, backed by all Buy recommendations from five analysts. The Baidu share price forecast is HK$171.20, which implies an upside of 51% on the current trading level.
