To mitigate the immediate impact of US export restrictions, Baidu has stockpiled a supply of cutting-edge artificial intelligence (AI) chips, as revealed by the Chinese technology giant. The firm anticipates a boost in AI revenues in the third quarter, with CEO Robin Li Yanhong confirming during an earnings call that they possess an adequate number of AI chips to sustain the advancement of their Ernie large language model (LLM) for the next two years. This strategic move is geared towards maintaining competitiveness with OpenAI’s ChatGPT.
Li expressed certainty that their reservoir of chips, coupled with other strategic measures, will effectively bolster various AI projects for their user base. Despite recognizing that these alternatives may not match the sophistication of US offerings, Li underscored Baidu’s unique AI frameworks and algorithmic expertise in overcoming challenges and enhancing reliability. While specific details about potential alternative chip suppliers were not disclosed, Li cautioned about US sanctions affecting major companies like Nvidia, which could hinder AI progress in China, potentially leading to consolidation among Chinese AI entities focusing on leading LLMs.
Taking a critical stance, Baidu’s CEO called out undisclosed Chinese companies for their intentions to autonomously develop fundamental AI architectures by accumulating state-of-the-art semiconductors and establishing intelligent computing centers. This development comes amidst concerns raised by industry peers such as Tencent Holdings and Alibaba Group Holding, who expressed worries about the repercussions of US AI chip restrictions on their cloud computing operations. In response to these limitations, Alibaba decided against independently listing its cloud division, citing associated risks.
Significantly, Baidu, a company historically dependent on online advertising for revenue, has notably shifted its focus towards advancing its Ernie Bot ecosystem. The rollout of its robot earlier this year marked a milestone as one of the leading Chinese tech firms to introduce a rival to ChatGPT, swiftly followed by Tencent and Alibaba. The Ernie Bot has attracted a user base of 70 million within three months of its launch, handling millions of queries daily and gaining popularity among various businesses.
While acknowledging that current generative AI revenue remains modest, CEO Li emphasized a strategic pivot towards enhancing AI growth opportunities to drive continuous revenue and profit expansion within the Ernie and Ernie Bot ecosystem. The recent financial report of the company indicated a slight 2% year-over-year decrease in AI cloud revenue in the previous quarter, with anticipations of a substantial contribution to advertising revenue in the upcoming quarter.
Looking forward, Baidu intends to redistribute resources to amplify investments in AI research, aligning with CFO Rong Luo’s focus on prioritizing conceptual AI and foundational models. Despite economic challenges, the projected revenue upsurge from conceptual AI products presents a promising avenue for Baidu to accelerate its growth trajectory. The company disclosed revenue of 34.45 billion yuan (US$4.7 billion) for the September quarter, showcasing a 6% increase from the previous year and slightly surpassing analysts’ expectations.
