Baidu shares dip on Apple's AI talks in China

Investing.com -- Baidu stock (NASDAQ:BIDU ) fell 2% following reports from Reuters that Apple (NASDAQ:AAPL ) is in discussions with Chinese tech giants Tencent and ByteDance to incorporate their artificial intelligence models into iPhones in China.

The move comes as Apple integrates OpenAI's ChatGPT into its devices outside of China. However, due to China's regulatory requirements for generative AI services, Apple has been compelled to seek local partnerships for its AI features. This development is significant for Baidu, which has been in its own talks with Apple about using its AI model in China, though these discussions have reportedly run into technical setbacks.

Apple's search for AI partners in China is seen as a strategic response to its declining market share in the country, where domestic brands like Huawei are offering smartphones with advanced AI capabilities. Huawei's recent launch of the Mate 70 series, featuring its own large language model, has intensified competition in the high-end market.

The potential integration of Tencent and ByteDance's AI into Apple's products could present a challenge for Baidu, which has been vying for the same opportunity. Baidu's shares in Hong Kong saw a sharper decline than the Hang Seng index , with a drop of 4.2% compared to the index's 0.6% fall. Meanwhile, Tencent's shares experienced a rise of 2.3%.

The Reuters report highlights the increasing importance of AI capabilities in smartphones, particularly in the competitive Chinese market. Apple's negotiations with Tencent and ByteDance are still in the early stages, and no immediate comments were received from the companies involved.

As Apple grapples with the need for regulatory compliance and seeks to maintain its presence in the Chinese market, the outcome of these talks could have significant implications for the AI landscape in China, and for companies like Baidu that are competing in this space.

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Source: Investing.com