Hong Kong shares of Baidu (NASDAQ:) plunged up to 10% after a report suggested its AI technology, Ernie, was used in tests by the People’s Liberation Army.
The company’s stock saw its biggest drop in almost two years, closing at HK$104.60 down 7.9%.
Rumors of the company’s potential association with the Chinese military have raised fears of possible U.S. sanctions.
The U.S.’s prohibition of key AI-related chip sales to Chinese firms could also affect Baidu’s AI aspirations.
Baidu Inc’s (NASDAQ:) shares sank Monday by as much as 10% in Hong Kong after the South China Morning Post alleged that its primary AI, Ernie, was utilized in the People’s Liberation Army testing programs.
The stock dipped to HK$104.60 by 21:18 ET (02:18 GMT), a decline of 7.9%, after an early session drop of 10%. This puts it on track for its steepest single-day loss in close to two years.
The Broader Market and AI
In contrast, the general index saw a slight increase by 0.1%.
A laboratory related to the People’s Liberation Army’s Strategic Support Force reportedly put an experimental AI system to test on Baidu’s Ernie and IFlyTek’s Spark, another prominent language model.
Baidu clarified to the SCMP that it has no direct link with the experimental lab, noting the Ernie bot’s version used in the tests was likely a publicly accessible edition.
Potential fallouts and market reactions
Nevertheless, the report increased fears that any assumed tie-up with the PLA might draw U.S. sanctions, amid both nations’ exploration of military AI applications.
Baidu’s AI, Ernie bot, seen as the company’s response to OpenAI’s ChatGPT, became available a few months after the latter, witnessing high sales in Q3 from its AI solutions.
Chinese counterparts Alibaba Group Holding (NYSE:) (HK 🙂 and Tencent Holdings (HK 🙂 sprinted to market their own solutions in 2023.
However, Baidu’s AI ambitions encounter potential hurdles, notably due to the U.S. ban on supplying crucial AI-related chips to Chinese firms. NVIDIA Corporation (NASDAQ:), a leader in AI chip manufacturing, has been hit by restrictions on selling its latest chips in China.
This policy could negatively impact AI progression efforts for Tencent and Alibaba, who have issued warnings regarding the issue. China has also retaliated to the ban with sanctions of its own.
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The current market events surrounding Baidu and the ongoing AI industry trends in China could significantly impact investment strategies and trading potentials, particularly in sectors associated with AI technology and the Hong Kong stock market.