Published - March 17, 2023 @ 2:50 PM (EET)

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On Friday, Baidu Inc. (NASDAQ:BIDU) experienced a surge of over 14% after various brokerages, including Citigroup, tested the company's recently revealed ChatGPT-like service and granted it provisional approval.

At an intimate event space in Baidu Inc's Beijing headquarters on Thursday, the tech giant's Chief Executive Robin Li aimed to impress an in-person and online audience by introducing its AI-powered Chatbot, Ernie Bot.

While Li emphasized how the product would improve through users' ability to give it feedback, investors were less impressed not to see Ernie Bot performing live and only showed a series of prerecorded videos of the chatbot answering questions about Chinese literature, solving math problems and generating images and videos.

This stock rebound reversed a 6.4% drop on Thursday after the market's initial reaction imitated Google's (NASDAQ:GOOGL) debut of its AI chatbot Bard, which it also rushed to push out in the face of OpenAi and Microsoft's (NASDAQ:MSFT) challenge to its core search business.

Google-parent Alphabet lost $100 billion from its market capitalization in a single day after the search giant's Bard Demo delivered factual errors.

WHY IT MATTERS

Artificial intelligence has officially become a crucial area of competition between the United States and China, with Baidu deemed the leading candidate from China's technology sector. 

Baidu's Ernie Bot is closely monitored to measure how China's offerings compare to those from Alphabet Inc. and ChatGPT maker OpenAI Inc. Despite the disappointment from the product's launch event, the favorable evaluations from analysts swept aside any concerns.

Bank of America analysts, including Miranda Zhuang, said in a note,

"we tried testing ERNIE Bot for a few tasks like advice, analysis, paper writing, picture generation, and we are satisfied with the results." Though their sample size was small and may not have been comprehensive, "the product is not static but continuous learning and improving," they said.

Following the optimism from analysts, 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., Arcsoft Corp., and chip designer Cambricon Technologies Corp.

Separately, the Chinese language Internet search provider announced Friday it can now operate robotaxis in a part of the capital city of Beijing with no human staff or driver inside.

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