Shares of Chinese tech giant Baidu surged over 10% in Asian trading on Tuesday, as investors reacted positively to the recent release of two new AI models.
Baidu unveiled the latest iteration of its foundational “Ernie” model and a new reasoning model over the weekend. The company claims the reasoning model rivals the capabilities of DeepSeek’s R1 model. However, CNBC has not independently verified these assertions.
According to Kai Wang, a senior equity analyst for Morningstar, this stock jump is likely a “delayed reaction” to the new models. Baidu is actively working to reclaim its leading position in China’s artificial intelligence sector.
“The stock also hasn’t gotten as much love as the other hyperscalers, but it’s still a platform that stands to benefit from greater AI demand since enterprises will need someone to help them with hosting, scaling, and computing power,” Wang explained.
A reasoning model is a sophisticated large language model engineered to emulate human problem-solving, dissecting prompts into manageable components and considering various approaches before formulating responses.
Baidu declared its ERNIE X1 reasoning model “delivers performance on par with DeepSeek R1 at only half the price,” while emphasizing its “stronger understanding, planning, reflection, and evolution capabilities.”
DeepSeek, a Chinese AI startup, initially disrupted the industry in January with the release of its R1 open-source reasoning model. This model was designed to rival those of American competitors, despite claims that it cost far less to produce and could function with less powerful chips.
Wei Sun, principal analyst of artificial intelligence at Counterpoint Research, observed that DeepSeek quickly surpassed Baidu. Baidu was actually one of the first companies to launch a ChatGPT-like chatbot, Ernie Bot. Sun also noted that other tech giants, such as Alibaba and Bytedance, have also gained ground.
“Baidu’s competitiveness hinges on whether its new models truly deliver on the promised performance and cost advantages,” Sun stated. He also noted that AI pricing, particularly in China, is highly dynamic.
Baidu has signaled a shift by making its latest AI models free for individual users. Earlier, users had to pay a monthly subscription fee to use the company’s then-current Ernie models. In addition, according to Reuters, the company announced last month that it will make its next-generation AI model, Ernie, open-source starting June 30. This is a change from Baidu’s prior focus on proprietary models.
Sun added, “By open-sourcing its models, Baidu seeks to once again position its technology as an industry standard, strengthening its influence in the AI community and expand its market share.”
