Shares of Baidu (BIDU, Financial) fell 4% on Thursday after Reuters reported that Apple Inc. (AAPL, Financial) is in talks with Tencent Holdings Ltd. and ByteDance Ltd. to use their artificial intelligence models in Chinese iPhones.
Apple is incorporating ChatGPT by OpenAI into devices outside China, but there are regulatory hurdles for generative AI services in the country. To meet compliance demands and recapture some market share from local brands like Huawei, Apple is jumping into the Chinese tech firms’ relationships game.
Earlier, it was in talks with Apple to add its AI model to the search company’s device, but now, as it has reportedly had technical issues, its place in the competitive AI scene might be in jeopardy. Meanwhile, Tencent and ByteDance have stepped up to take on Apple in the search for AI integration.
The strategy comes months after Chinese rival Huawei released the Mate 70 series, featuring sophisticated AI capabilities to drive further competition in China’s premium smartphone market. Tencent’s shares rose 2.3 per cent, and Baidu’s Hong Kong-listed shares fell 4.2 per cent, underperforming the Hang Seng index’s 0.6 per cent decline, the Reuters report said.
The talks between Apple, Tencent, and ByteDance are in the early stages as AI features become increasingly important in smartphones, especially in China’s high-stakes market. The outcome could rewrite competitive dynamics for Apple and its Chinese partners or cause headaches at Baidu as it braces for regulatory sand and technical headwinds.
This article first appeared on GuruFocus.
