Baidu stocks see biggest drop since 2022 amid rumours of military link

Chinese search engine firm Baidu has just seen its worst day on the stock market since 2022 after investors were rattled by a report linking its AI product Ernie Bot with the Chinese military.

Baidu’s Hong Kong-listed stocks plummeted 11.5% on January 15, with traders citing a report from the South China Morning Post (SCMP) as the cause. The report, published on January 12, delves into an academic paper published by a research laboratory under the People’s Liberation Army’s (PLA) Strategic Support Force, which oversees the Chinese military’s cyberwarfare among other things.

The paper details how the researchers fed Ernie Bot prompts to generate military plans for Libyan troops in response to a hypothetical US attack. This is the first time the Chinese military has publicly confirmed its use of commercial large language models.

Investors are concerned a link to the Chinese military could make Baidu the target of future trade sanctions from the US, much as Huawei is as seen an espionage risk.

Baidu immediately denied any link with the military, noting that the academic paper looked at by the SCMP shows the authors used functions available to any user interacting with generative AI tools.

“Baidu has not engaged in any business collaboration or provided any tailored service to authors of the academic paper or any institutions with which they are affiliated,” the statement clarified. “We have no knowledge of the research project, and if our large language model was used, it would have been the version publicly available online.”

The statement, which was issued the day after the SCMP report was published was not enough to reassure investors, with the share price drop happening in the days after.


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