Baidu says it sees limited impact from US chip restrictions after third-quarter revenue beat

Baidu says it sees limited impact from US chip restrictions after third-quarter revenue beat

  • Baidu’s third-quarter revenue rose 6% to 34.45 billion yuan, above analysts’ estimates
  • Adjusted net income increased by 23% to 7.27 billion yuan
  • The company sees risks to China’s AI development in the long term from US export restrictions

Nov 21 (Reuters) – Chinese technology giant Baidu said on Tuesday it has enough artificial intelligence chips in stock to cushion the impact of U.S. technology export restrictions on its business for now, after reporting quarterly revenue that beat expectations.

Robin Li, CEO of the group whose businesses span from China’s largest search engine to generative artificial intelligence, told analysts after the company’s earnings that its stock will allow it to continue upgrading Ernie’s Large Language Model (LLM) for up to two years though it will. Still proactively looking for alternatives.

“Restrictions on chip exports to China actually have a limited impact on Baidu in the near term,” he said.

“We believe our chip reserve combined with other alternatives will be sufficient to support many native AI applications for our end users.”

However, Li said that US sanctions on exports of advanced AI chips to China made by companies like Nvidia (NVDA.O) will impact the overall development of AI in China, and he predicted that the shortage could lead to consolidation of LLMs in the country. Li said last week that China has more than 230 master’s degrees in law.

Chinese rivals Alibaba (9988.HK) and Tencent (0700.HK) said last week that the US restrictions would impact their cloud computing businesses, with Alibaba shelving its plan to list its cloud unit independently due to uncertainty.

Baidu’s cloud AI revenue in the third quarter fell 2% year-on-year, which it said was due to weak demand in intelligent transportation projects. But Li said he believes it will achieve positive growth in the fourth quarter due to increased demand for generative AI services.

“Unique AI architecture”

A Baidu sign is pictured at the company’s headquarters in Beijing, China on March 16, 2023. REUTERS/Tingshu Wang/File Photo Get License Rights

Li did not say what replacement chips Baidu was looking at, but he said that although these options were not as advanced as those in the United States, Baidu’s “unique AI architecture and algorithm strengths will continue to help us improve efficiency.” “.

Reuters reported earlier this month that Baidu placed an order for home-made AI chips from Huawei in August in anticipation of restrictions and as an alternative to Nvidia. Baidu did not respond to a request for comment on the report.

Baidu, which derives most of its revenue from advertising, reported revenue for the quarter ended Sept. 30 of 34.45 billion yuan ($4.7 billion), up 6% year-on-year and above analyst estimates of 34.33 billion yuan, according to LSEG. Data.

Its US-listed shares rose 1.8% in morning trading.

The International Monetary Fund said earlier this month that China’s economy is expected to grow by 5.4% this year, leading to an upward revision of its previous forecast of 5% growth. This has prompted companies to spend more on online consumer advertising.

Baidu’s online marketing revenue in the third quarter rose 5% to 19.7 billion yuan.

It reported adjusted net income of 7.27 billion yuan, up 23% from 5.89 billion yuan for the same period last year.

The company reported adjusted profit of 20.4 yuan per American depositary share (ADS), compared to a profit of 16.87 yuan per share in the previous year. This also exceeded analysts’ average estimate of 16.55 yuan per ad, according to LSEG.

($1 = 7.21 Chinese yuan)

(Reporting by Yuvraj Malik in Bengaluru and Yelin Mo in Beijing; Preparing by Mohammed for the Arabic Bulletin) Editing by Varun Hong Kong, Miral Fahmy, Sharon Singleton and Emilia Sithole Matarese

Our Standards: The Thomson Reuters Trust Principles.

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