Baidu Stock Crashes Nearly 10% After AI Reveal Backfires

Baidu BIDU walked into its big AI moment expecting momentum, but the market had other plans. After unveiling its new Ernie 5.0 model, the stock dropped as much as 9.8% in Hong Kong, a sharp reversal for a name that's still up more than 40% this year. Investors had been hoping for something that could reset Baidu's position in a competitive AI landscape, especially as the global AI trade could be losing some intensity amid questions about valuations and investment costs. Instead, the debut seemed to land with less punch than expected, leaving the recent rally vulnerable.

Robin Li didn't exactly soften the blow. Speaking to local press, he said Baidu had been an early riser but late to the fair, a comment that possibly reinforced concerns about whether the company can regain ground it once led. At the event, he also emphasized that Baidu would continue pouring resources into cutting-edge models, but analysts weren't convinced the new release shifts the earnings trajectory in a material way. Bloomberg Intelligence's Robert Lea noted that Ernie 5.0 brings some impressive features, yet may not be differentiated enough to alter what he sees as a highly challenged outlook.

And while Baidu looks for a spark, its competitors are accelerating. Alibaba is preparing a redesign of its main mobile AI app to more closely resemble ChatGPT, though its shares slipped as much as 3.5% Friday, erasing the previous day's gain. Between rising rivals like DeepSeek and existing giants pushing forward, Baidu's latest model enters a market moving faster than everand investors could be signaling they want a bigger leap before assigning the next leg of upside.