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Chinese technology leader Baidu has made a significant stride in the artificial intelligence landscape by launching two new AI models, aiming to reclaim its competitive edge in a sector that is rapidly evolving and increasingly crowded.
On Sunday, the company introduced its first reasoning-focused model along with its inaugural foray into an open-source licensing strategy.
While analysts perceive this move as a step forward for Baidu, they also underscore that it highlights the company’s ongoing challenge to keep pace within an AI market that is particularly aggressive. The Ernie bot, an early entrant in the chatbot domain reminiscent of ChatGPT, has struggled to achieve widespread adoption.
According to Lian Jye Su, chief analyst at Omdia, “The new models enhance Baidu’s competitiveness since the company has been behind in the race to release a reasoning model.” A reasoning model is characterized as a sophisticated large language model that dissects tasks into smaller components, exploring various approaches to produce a response and solving complex problems similarly to human reasoning.
Earlier this year, the Chinese startup DeepSeek disrupted the global AI ecosystem by unveiling its R1 reasoning model, managing to compete with American rivals while being significantly more affordable.
Baidu claims that its new ERNIE X1 reasoning model matches the performance of DeepSeek’s R1 model while only costing half as much. The company asserts that its model boasts superior capabilities in understanding, planning, reflection, and evolution. However, CNBC has not independently confirmed these assertions.
Wei Sun, a principal analyst at Counterpoint Research, remarked on the future of Baidu’s competitiveness, suggesting it largely depends on the ability of the new models to meet their stated performance and cost expectations. “Baidu is clearly in a catch-up mode, mainly due to its slow pace of innovation and misestimation of the rapid changes in market dynamics,” Sun noted.
What Transpired?
Baidu launched its first generative AI platform in 2023, marking one of China’s initial responses to OpenAI’s widely recognized ChatGPT.
Despite some early success, Baidu’s Ernie has been overshadowed by both startups and established tech giants, including Alibaba and ByteDance, who have entered the AI market with robust offerings.
Several factors have contributed to Baidu’s challenges and its slower approach to innovation. Ray Wang, principal analyst and founder of Constellation Research, pointed out that Baidu fell behind when it focused on building proprietary models and competing heavily for AI funding. Additionally, regulatory scrutiny has posed further distractions for the company.
Proprietary models keep their code base and architecture confidential, while companies like DeepSeek have opted for open-source approaches, enabling broader collaboration among developers. Wang elaborated that this closed-source methodology resulted in Baidu training its models from scratch, whereas open-source models could take advantage of communal resources.
Recently, Baidu’s shift towards open-source models signals a significant departure from its historically proprietary stance.
“Baidu has traditionally favored its proprietary business model and was critical of open-source models, but disruptors like DeepSeek have demonstrated their competitive viability,” said Su from Omdia. He added that Baidu appears to be following the lead of major competitors such as Alibaba, DeepSeek, and Tencent, all of whom have embraced open-source models.
Baidu’s Strategic Advantages
As reported by Morningstar’s Wang, AI companies like Baidu are launching new models almost monthly, with the competition consistently trying to outdo each development.
However, the key differentiators in the Chinese AI landscape center around the data utilized in model training and the specific use cases they address.
In these aspects, Baidu holds certain advantages due to its vast ecosystem of popular applications and services, including its primary search engine, which integrates access to various AI tools and the online forum app Baidu Tieba.
“Thanks to its extensive user base in consumer-facing services, particularly AI-driven search and recommendation systems, Baidu can preserve its leadership position in the market as long as it continues to innovate,” Su stated.
During an earnings call late last year, Baidu’s CEO Robin Li expressed optimism regarding the transformative potential of generative AI, projecting it to evolve Baidu’s search function into a “new killer app in the age of AI.”
“The essence of AI lies in data, processing power, effective algorithms, and affordable energy. Accumulated data is essential for participation in this landscape, and Baidu has that data,” said Wang from Constellation Research.
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