ChatGPT Frenzy Meets Regulatory Reality in China

The recent surge in artificial intelligence (AI) related stocks are starting to cool off as investors face some harsh realities. Google’s AI chatbot has fallen short of expectations, causing a significant drop in the company’s stock prices. This has prompted a warning from a Chinese newspaper, advising investors not to blindly jump on the bandwagon of AI-related stocks and to exercise caution as it may take some time for these concepts to prove their worth.

Baidu Inc. saw a decline of up to 8.5% in Hong Kong following its announcement that its AI-powered chat service was on track for launch. Other companies such as Zhihu Inc., CloudWalk Technology, Beijing Deep Glint Technology, and Hanwang Technology have also seen similar declines. These events serve as a reminder to investors that not all AI-related stocks are guaranteed to perform well and to carefully consider their investments in the industry.

The increased interest in ChatGPT has been marked by speculative buying, leading market strategist Zhang Gang to caution that the sentiment could easily cool down with regulatory warnings. The technology, which was launched in November, has sparked an intense competition among tech giants, with Microsoft showcasing its use as a supplement to Bing and Google debuting a similar service called Bard. A number of Chinese companies, including Alibaba and NetEase, have also announced their own ChatGPT-like services.

However, as the initial excitement has worn off, attention has shifted to the challenges these companies face in monetizing and gaining regulatory approval for their ChatGPT services. Alphabet’s shares saw a significant drop of 8.9% after a disappointing demonstration of its chatbot. Meanwhile, Chinese regulators have warned investors about the speculation and three companies have received inquiries from local stock exchanges after their shares rose more than 30% over three consecutive days.

It may take some time for the real winners in this field to emerge, as regulatory approval and monetization are crucial for success. According to Bloomberg Intelligence analysts, it may not be until 2024 that the impact of ChatGPT-style tools developed in China, like those being tested by Alibaba and NetEase, can be fully evaluated. The competition among these companies is expected to drive innovation in technology throughout 2023.

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