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Baidu says sees limited impact from U.S. chip curbs after Q3 revenue beat

Baidu's CEO says more than 70 large AI language models have been released in China.

After revealing quarterly revenue that exceeded projections, Baidu (9888. HK), the Chinese internet giant, said on Tuesday that it has enough artificial intelligence processors in store to cushion the impact of U.S. technology export restrictions on its business for the time being.

After the company’s earnings, Robin Li, the group’s CEO, informed analysts that, thanks to its stockpile, it could continue to upgrade its Ernie large language model (LLM) for up to two years. The group’s businesses range from generative A.I. to China’s largest search engine. However, it will still actively look for alternatives.
“The restrictions on chip exports to China actually have a limited impact on Baidu in the near term,” he stated.

“We believe our chip reserve as well as other alternatives will be sufficient to support a lot of A.I. native apps for our end users.”

I did, however, forecast that the shortage may lead to a consolidation of LLMs in China and that the U.S. prohibitions on the shipment of cutting-edge A.I. chips to China, manufactured by companies like Nvidia (NVDA.O.), will have an influence on A.I. development in general in China. China had more than 230 LLMs, according to Li last week.

Chinese competitors Tencent (0700. H.K.) and Alibaba (9988. H.K.) stated last week that the U.S. restrictions would impact their cloud computing operations. Due to unanswered questions, Alibaba canceled its intention to list its cloud division separately.

Baidu attributed its 2% year-over-year reduction in A.I. cloud revenue in the third quarter to the lackluster demand for intelligent transportation projects. Li expressed confidence that the company would see good growth in the fourth quarter due to rising demand for its generative A.I. services.

Although these alternatives were not as sophisticated as those available in the U.S., Li stated that Baidu’s “unique A.I. architecture and strengths in algorithm will continue to help us improve efficiency” without specifying which alternative processors the company was looking for.

In August, according to a Reuters story published earlier this month, Baidu ordered A.I. processors from Huawei, a domestic manufacturer, as a backup for Nvidia in anticipation of the restrictions. A request for comment from Baidu regarding the report was not answered.

According to LSEG statistics, Baidu, which makes the majority of its money from advertising, recorded revenue for the quarter that ended on September 30 of 34.45 billion yuan ($4.7 billion), up 6% from the previous year and higher than analysts’ projections of 34.33 billion yuan.

In early trade, its U.S.-listed shares increased 1.8%. The International Monetary Fund revised its prior prediction of 5% growth to 5.4% growth for China’s GDP this year, announced earlier this month. As a result, businesses are now investing more in online consumer advertising.

Online marketing revenue for Baidu increased 5% to 19.7 billion yuan in the third quarter. Adjusted net income was recorded at 7.27 billion yuan, a 23% increase from 5.89 billion yuan at the same time the previous year.

Compared to a profit of 16.87 yuan per share a year earlier, the company recorded an adjusted profit of 20.4 yuan per American Depositary Share (ADS). Additionally, as per LSEG, this surpassed the analysts’ consensus estimate of 16.55 yuan per ADS.

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