Baidu revenue surges as it expands AI push: "Everyone is riding this wave of AI"

CGTN Europe

CGTN Europe interviewed Rob Kniaz, founding Partner of H-Tree Capital

Transcript

00:00Hello, welcome back.

00:01Chinese tech giant Baidu has reported a surprise jump in revenue

00:05despite intense competition in artificial intelligence

00:07and an ongoing economic slowdown.

00:10First quarter revenue rose 3% to $4.5 billion.

00:15Net income for the first three months of the year

00:17came in at just over $1 billion,

00:19which was up 42% from the same period last year.

00:23And as part of that AI competition,

00:25Baidu has axed subscriptions for its chatbot Ernie,

00:28making it free for individual users.

00:31Rob Nyes is founding partner of H-Tree Capital,

00:34a London-based technology venture capital firm.

00:37Everyone's riding this wave of AI right now in the frenzy

00:39to apply it to different areas of opportunity.

00:42Baidu, again, is fairly unique, like Google or Alphabet,

00:45in a way that they also have self-driving cars,

00:47so they can also apply AI across their various business units.

00:51So is that going to be where the company's growth is,

00:53do you think, the AI division?

00:56I think more likely than not.

00:57I mean, obviously, they have lots of different bets on,

00:59like Alphabet does,

01:00but I think, you know, in the clear and present sense,

01:02the most obvious opportunity is going to be all around AI

01:04and spinning that as many different ways as they can.

01:07When it comes to their chat GPT equivalent,

01:10we'll call it Ernie,

01:11they've made that free to individual users.

01:14That sounds like a counterintuitive move.

01:18I think it's a way to get awareness and usage up,

01:20and frankly, to get them better data

01:22that they can start tuning themselves.

01:23I mean, when you're building an AI model,

01:26there's training data and then there's real user data,

01:28and frankly, for someone starting from behind,

01:30like they are with Ernie,

01:31nothing really benefits you better

01:32than having real actual user interface.

01:35So I think it's a smart move for them to build Mindshare

01:38and to show that, frankly,

01:39they can still come up and build a winning product.

01:42It's obviously a very competitive space, AI,

01:44particularly in China.

01:45How competitive is Baidu in that arena, do you think?

01:48I think that they're a player.

01:51I mean, they're one of several

01:52that are all leapfrogging each other.

01:54Nearly week by week,

01:56one will do another launch that upends the other.

01:58So I think it's still an open stakes race

02:00that it's unclear who will be an ultimate winner

02:02or whether there'll be several

02:04around the same level of quality.

02:06But I think Baidu has just as good a shot as anyone does,

02:08similar to how the US players are shaking out now.

02:11And you mentioned Baidu's autonomous ride-hailing service,

02:15Apollo Go.

02:16Where does Baidu stand in that market?

02:20Yeah, they're coming from behind.

02:22They're looking at entering Europe now.

02:24I think it's interesting and it's an ambition

02:26that unlike other pure AI products,

02:28it's not just siloed into China

02:30and they're thinking about taking over the world

02:31in a similar way.

02:33It's interesting.

02:34It's much more of a long-term bet

02:35than pure AI stuff is right now.

02:37But I think it shows the company

02:38is thinking quite strategically

02:39about how do they expand worldwide

02:41and how do they find interesting areas

02:43that require a lot of capital

02:45and you build an eventual moat to keep others out.

02:48Do you think that is going to be a big market,

02:50the autonomous driving industry?

02:51Where do you see that going this year?

02:54Yeah, I think it's still early days

02:55that we've said it's ready for autonomous driving

02:58every year for the past five or six years

03:00or it's a year or two away at best.

03:02And now, frankly, we have maybe two cities in California

03:04that have somewhat viable access to this.

03:07And even in LA, you can't take an autonomous car,

03:10self-driving taxi on the highway, for example.

03:12I think it's still a ways off,

03:14but these are long-term bets you have to make as a company

03:16that if and when it does reach a point

03:18of hitting critical mass and acceptance,

03:20there's going to be a lot of cities

03:21where this is going to be a desirable product.

03:23So in my mind, it's a bet these companies need to make

03:26and make strategic sense.

03:28So going back to the bigger picture,

03:30good figures for Baidu this time around.

03:32What might be the hurdles they need to look out for going forward?

03:37I think for all these companies with AI,

03:39the costs are quite staggering up front to build the models,

03:42train the models, support the usage.

03:44So when you have unlimited free tiers,

03:46that of course lends itself to very wide use.

03:48The real question is, can they up the stakes

03:50and increase fees as they go to match the actual usage?

03:54You're seeing this now in the US

03:56with some of the providers,

03:57building OpenAI, for example,

03:59building a programmer level tier

04:01that's $250 a month, for example.

04:04I think all these companies are going to make that evolution

04:06where it's free or cheap in the early days,

04:08then in time they start to monetize

04:09and find the right price point

04:11that both companies or individuals are willing to accept.

04:14And that's still not really shaken out.

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