Baidu (NASDAQ:BIDU) stock is in focus today after the Chinese technology giant issued better-than-expected fourth-quarter earnings and announced that it would implement its highly anticipated chatbot, Ernie Bot, in March of this year.
Investors seem pleased with Baidu’s strong Q4 print and the announcement that the company will buy back $5 billion worth of its stock this year. However, what seems to have people really excited is news that Baidu plans to integrate Ernie Bot across all of its operations. Baidu is the leader in artificial intelligence (AI) in China and is viewed as a critical player in the global race to roll out chatbots to users.
Before today, BIDU stock had risen 18% on the year to trade at $140 per share. However, the stock remains 9% lower than it was trading 12 months ago. And, in a very volatile trading session this morning, BIDU stock has slipped about 3%.
What Happened
Beijing-based Baidu reported revenue for the quarter that ended Dec. 31, 2022, of $4.80 billion, which was ahead of Wall Street forecasts. The company also reported earnings per share (EPS) of $2.21 for Q4, better than analysts had expected by 16 cents. The company’s free cash flow amounted to $859 million at the end of last year.
At the same time as it delivered Q4 results, Baidu announced a $5 billion share repurchase plan, saying that the buyback has been made possible due to solid cloud computing revenues offsetting a decline in online advertising. While investors undoubtedly like the share repurchase plan, they are especially cheering Baidu’s plans to roll out Ernie Bot company-wide in March.
Why It Matters
Baidu is seen as a global leader when it comes to AI. The company’s first announcement of Ernie Bot’s existence on Feb. 7 was enough to send its stock price up 16% in a single trading session. Baidu has said that Ernie Bot, which stands for “Enhanced Representation through Knowledge Integration,” will allow users to write poems and papers and generate images — all within seconds.
First developed in 2019, Ernie Bot is now in its third iteration and being tested internally at Baidu, the company has said. There are hopes that Baidu’s chatbot will be more advanced and polished than ChatGPT and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Bard chatbot. Since it was introduced publicly, Bard has encountered problems with accuracy and user interactions.
AI stocks have captured the imagination of investors, with some share prices of artificial intelligence companies up more than 50% in recent weeks. Since its launch last fall, ChatGPT has become the fastest app in history to reach 100 million downloads.
What’s Next for BIDU Stock
The strong earnings, a $5 billion stock buyback program, and news that Ernie Bot is on track to launch in March have BIDU stock trading up today. It will be interesting to see if Ernie Bot lives up to its considerable hype once the chatbot gets into the hands of users next month. With its focus on AI, Baidu is a Chinese company and stock worth watching.
On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
