Google's slip-up and Chinese warnings put investor frenzy over AI in check

Analysts say it will take some time for real winners to emerge in the space, with regulatory approval and monetisation of the technology being key for such services to take off

Microsoft's Yusuf Mehdi speaks during an event introducing a new AI-powered Microsoft Bing and Edge, in Washington. AFP

Investors chasing the sizzling rally in global artificial intelligence-related stocks are getting a reality check.

Google’s demonstration of its artificial intelligence chatbot has already underwhelmed investors with accuracy concerns, spurring the biggest drop in its parent’s shares in more than three months.

A Chinese newspaper warned investors not to blindly join the speculation about stocks that could benefit from rolling out such AI capabilities, saying that it will take time for such concepts to prove their value.

Baidu Inc slumped as much as 8.5 per cent in Hong Kong, after scoring its best day since March when it said Tuesday its ChatGPT-like service was on track for roll out. Other firms including Zhihu, CloudWalk Technology Co, Beijing Deep Glint Technology Co and Hanwang Technology Co also declined.

“The recent buying into ChatGPT has been very speculative. So, the sentiment can cool down very easily if there are regulatory warnings,” said Zhang Gang, strategist at Central China Securities.

The arms race among global tech giants has intensified since ChatGPT took the internet by storm, after its launch in November. Microsoft, which owns a stake in the OpenAI start-up behind ChatGPT, showed off how the technology will supplement its Bing search engine. Not to be outdone, search giant Google quickly showed a novel service called Bard that would incorporate similar AI features. A slew of Chinese companies from Alibaba Group Holding to NetEase have also announced this week that they are developing ChatGPT-like services.

With the initial euphoria tapering, attention has now shifted to navigating the milestone progress at these firms. Alphabet shares tumbled as much as 8.9 per cent on Wednesday after an underwhelming demonstration of its new chatbot.

In China, regulators are warning investors against the frenzy. At least three companies have received inquiries from local stock exchanges after shares rose more than 30 per cent over three straight sessions this week. That has prompted CloudWalk, a face recognition technology developer, to clarify that it hasn’t generated any revenue from ChatGPT products and that it wasn’t involved in any collaboration with OpenAI.

Analysts said it will take some time for real winners to emerge in the space, with regulatory approval and monetisation of the technology being key for such services to take off in China.

“The verdict on China’s self-developed ChatGPT-style tools, which look set to enter the market this year after media reported February 8 that Alibaba is testing its application, similar to NetEase, might only emerge in 2024 as competition spurs innovations in the technology through 2023,” wrote Bloomberg Intelligence analysts Catherine Lim and Trini Tan.