BAIDU plunged its most in more than a year after a report linked its Ernie artificial intelligence (AI) platform to key military research, spurring concerns about retaliation from Washington.

The search engine firm, generally considered one of China’s leaders in AI development, fell as much as 10 per cent on Monday (Jan 15), deepening losses from US trading on Friday. Traders in Hong Kong cited a South China Morning Post report about how a university affiliated with the People’s Liberation Army’s (PLA) Strategic Support Force – which oversees cyberwarfare – had tested its AI system on Baidu’s ChatGPT-like Ernie.

Baidu on Monday denied any affiliation or partnership with the institute. But the report about the hook-up with the PLA raised concerns that Washington may consider imposing sanctions on Chinese firms to curtail such collaboration, as part of efforts to contain its geopolitical rival. Searches on Monday found that the research paper cited by the South China Morning Post had been taken offline.

“Baidu has no affiliation or other partnership with the academic institution in question,” a company spokesperson said. “We have no knowledge of the research project, and if our LLM was used, it would have been the version publicly available online.”

Baidu in 2023 debuted Ernie – the country’s earliest answer to OpenAI’s ChatGPT – jumping to the forefront of a nationwide development frenzy that’s caught up dozens of startups and most tech leaders from Tencent Holdings to Alibaba Group Holding.

Baidu’s Ernie Bot amassed 70 million users three months after its public rollout, and the company claims its self-developed model has matched GPT-4 in terms of general capabilities.

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“People are worried about sanctions on Baidu obviously after the news report about military ties. They fear that the US government may announce measures to target Baidu,” said Steven Leung, executive director at UOB Kay Hian Hong Kong. “The overall sentiment over China is weak and US-China relationship is still intense, so investors sell first no matter if the news is true or not.” BLOOMBERG