Source: Barron Weekly

$BIDU-SW (09888.HK)$The company announced on Tuesday that it will launch a similar ChatGPT product that has attracted global attention and imagination, called Wen Xin Yiyan, which will be publicly released after internal tests are completed in March. The news sent Baidu, Inc. 's Hong Kong shares sharply higher on Tuesday, rising more than 15 per cent at one point in intraday trading, the highest level since February last year.

Investors with a "buy the rumor" mentality have been buying Baidu, Inc. 's shares after hearing rumors that Baidu, Inc. might launch ChatGPT-like products on January 30th, and the company's US shares rose 9 per cent at one point.

Barron Weekly points out that this market behavior may be rational, but there is a contradiction that if Baidu, Inc. releases ChatGPT products in March, as promised, within a few months, it may indicate that chatbots are not that valuable, at least in their current form.

The value of Wen Xin Yi Yan to Baidu, Inc. is to consolidate his position as the first AI in China.

Matthew Sheehan (Matthew Sheehan), an artificial intelligence researcher at the Carnegie Endowment for International Peace (Carnegie Endowment for International Peace), believes that it is not easy to build a moat around artificial intelligence technology. Include$Alphabet-C (GOOG.US)$、$TENCENT (00700.HK)$和$Alibaba (BABA.US)$Many companies are working on the technology, and they may be waiting to learn from the mistakes of the companies that took this step first. "the level of commercialization of artificial intelligence technology is still a question, and all theoretical breakthroughs occur in the public domain," Sheehan said. "

The value of artificial intelligence technology to Baidu, Inc. may be that the company's position as a leader in artificial intelligence in China will be further consolidated. Baidu, Inc. 's growth driven by search and advertising peaked some time ago, and its US stock has fallen nearly 35 per cent in the past five years, prompting Baidu, Inc. to continue to invest in artificial intelligence, especially self-driving technology.

This year, Baidu, Inc. 's fleet of driverless taxis will double to 2000, while an electric vehicle joint venture between Baidu, Inc. and Geely Automobile (0175.HK) is gaining momentum. "the market is underestimating the growth potential of these new areas," said Sharukh Malik, Asia equity portfolio manager at Guinness Asset Management, the asset manager.

Baidu, Inc. 's slowing growth has partly allowed the company to avoid the regulatory storm that has affected companies such as BABA and Tencent over the past two years. "Baidu, Inc. faces less regulatory pressure," said Vivian Lin Thurston, emerging markets portfolio manager at William Blair.

Malik also pointed out that Baidu, Inc. has cooperated with the Chinese government to carry out the "Smart intersection" project, which accelerates the digital transformation of traffic junctions through roadside holographic perception, combined with cutting-edge technologies such as artificial intelligence, big data and cloud computing. "Baidu, Inc. is demonstrating his ability to participate in national infrastructure construction," Malik said. "

Chinese companies have an advantage in the AI competition

Anna Ashton, head of the China research team at Eurasia Group, a political risk consultancy, predicted that US President Joe Biden could issue an executive order related to outbound investment within months after the recent unmanned airship strayed into US airspace due to force majeure, which could leave some investors with reservations about allocating new investment funds in at least some areas of the Chinese market.

Analysts expect that whatever restrictions are introduced by the Biden administration may be limited to a few areas such as sensitive advanced technologies such as semiconductor chips or quantum computing technology, but Congress may seek broader restrictions on areas such as artificial intelligence.

Arthur Kroeber, head of research at Gavekal Dragonomics, a China-focused research firm, believes this could prevent US investors from buying shares in companies such as Baidu, Inc., BABA or Tencent.

Barron Weekly believes that the rapid response of Chinese companies to ChatGPT sent a message to the United States: if the US government's restrictions on semiconductor exports are designed to prevent China from gaining access to advanced applications such as artificial intelligence, then so far this effort has not worked very well.

Baidu, Inc. 's chip, which comes from Kunlun Core, a subsidiary of the company, has about 1 billion users' data and does not have so many privacy restrictions, which may be as important as hardware for artificial intelligence development.

Jason Hsu, chief investment officer of Rayliant Global Advisors, believes that this could become a "secret recipe" for Chinese companies. "China has more data points and fewer privacy restrictions, which will bring some advantages to Chinese companies in artificial intelligence competitions," he said. "

According to Barron Weekly, whether the chatbot eventually prospers or fails, the competition now looks serious and open. At a time when search, social media, e-commerce and other things have become a thing of the past, artificial intelligence is rekindling the "animal spirit" of technology companies and their investors.

Pruksa Iamtongthong, senior investment director at abrdn, an asset management firm, believes that this is good news for "technology drivers" (tech enablers) such as chipmakers who have been "out of date". "I intuitively think the winner will be a company like Taiwan Semiconductor Manufacturing Co Ltd," she says.

Hsu also believes that over a period of time, hype itself can be a reward. "while I don't see much fundamental support behind this, market sentiment will continue to direct capital to anything that claims to be related to the Chinese version of ChatGPT," he said.

AI-related stocks rose rapidly

At the same time, investors' enthusiasm for artificial intelligence software continues to rise.

$Microsoft (MSFT.US)$It was announced in January that it had increased its investment in OpenAI, which launched ChatGPT, reportedly as much as $10 billion. Alphabet Inc-CL C co-founders Larry Page and Sergey Brin have also re-approached the company to discuss how to speed up the launch of new artificial intelligence features.

Barron Weekly believes that the biggest long-term winners in the field of artificial intelligence may be Microsoft Corp, Alphabet Inc-CL C's parent company, Alphabet, and other large companies that have invested heavily in this technology, including$IBM Corp (IBM.US)$ 、$NVIDIA (NVDA.US)$和$Advanced Micro Devices (AMD.US)$. But retail investors are looking for small companies that may return faster.

Alphabet CEO Sandal Sundar Pichai announced in a blog post on Monday that the company is preparing to launch an experimental artificial intelligence conversation service called Bard, which is based on Alphabet's dialogue application language model LaMDA. Pichai said Bard will take advantage of information on the Internet, which is different from ChatGPT, which currently relies on a large but not unlimited training model that does not include current events.

Pichai also said that Alphabet will launch new artificial intelligence features as part of Alphabet Inc-CL C's search experience.

"soon, users will see artificial intelligence-driven functions in the search, which can extract complex information and multiple perspectives into a format that is easy to digest, so that users can quickly understand the overall situation," Pichai wrote in a blog post. and learn more from the Internet. "

Last week, the software company$C3.ai (AI.US)$Using the technology of OpenAI, Alphabet Inc-CL C and other companies, we announced a set of enterprise application search tools based on generative AI.

Thomas Siebel, chief executive and founder of C3.ai, told Barron Weekly last week that search based on generative artificial intelligence may be the biggest breakthrough in the way people interact with corporate applications since his first company, Siebel Systems, added a web-based interface to its customer relationship management software in 2002.

C3.ai shares soared 46 per cent last week, rose another 6 per cent on Monday and are up 145 per cent so far this year. ChatGPT's share price has more than doubled in the less than three months since its launch, and other AI-related stocks have risen even more.

$BigBear.ai Holdings (BBAI.US)$Its share price was less than $1 on the day of ChatGPT's launch, and has risen more than 480% since ChatGPT's launch. The company, which offers "artificial intelligence-driven" decision support software, went public after merging with a special purpose acquisition company (SPAC) at $10 a share in December 2021.

BigBear CEO Mandy Long told Barron Weekly that she believes ChatGPT's example highlights the power of technologies used in government and business applications over the past two decades, especially BigBear, which derives most of its revenue from defense and intelligence agencies and provides tools for integrating and intelligentizing large amounts of information.

$SoundHound AI (SOUN.US)$It rose 28% on Monday, and the share price has nearly tripled from $1.28 to $3.52 since the launch of ChatGPT. The company produces "voice artificial intelligence products" for carmakers, restaurants and consumer equipment manufacturers, including speech recognition, text-to-speech and natural language understanding. SoundHound went public in April 2022 through a merger with SPAC.

SoundHound attributed the sharp rise in share prices to the recent surge in investor interest in artificial intelligence.

"AI is clearly regaining the attention of investors, especially generative AI and ChatGPT," the company said. SoundHound is a leader in conversational artificial intelligence, with strong business growth momentum and a large number of corporate customers. The company made significant financial progress last month, laying a good foundation for our sustainable growth and long-term differentiation. "

Both BigBear and SoundHound took advantage of the rise in share prices to issue additional shares, with SoundHound selling $25 million of preferred shares in January and BigBear selling $25 million of shares and warrants at $1.80 a share.

Investors also seem to be interested in small-cap quantum computing stocks that were hit hard by the collapse of technology stocks last year. So far this year$Quantum Computing (QUBT.US)$It has increased by 65%.$IonQ Inc (IONQ.US)$Increased by 63%.$Rigetti Computing (RGTI.US)$It's up 60%.

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