Baidu reportedly in talks with Apple over AI tie-up, shares surge

Investing.com-- Shares of Baidu Inc (NASDAQ:BIDU) rose sharply in Hong Kong trade after multiple media reports suggested that the company was in talks with Apple Inc (NASDAQ:AAPL) over using the Chinese internet giant’s AI models in Apple’s iPhone software in China. 

Chinese media reports said that Baidu’s AI model will be used in Apple’s iPhone 16 and IOS 18 in China. The reports came just days after the Wall Street Journal reported that Apple was in preliminary talks with Baidu over such a move. 

Baidu's Hong Kong shares (HK:9888) surged 6.4% to HK$104.50 by the midday break, underpinning a 0.5% rise in the Hang Seng index.

Chinese media reports said Apple had also approached Alibaba Group (NYSE:BABA) over such a move, but had eventually settled on Baidu. Alibaba's Hong Kong shares (HK:9988) fell over 1% on Monday.

Using Baidu’s AI models will also help Apple soothe U.S. regulatory concerns over using proprietary AI technology in China, given that the U.S. government has repeatedly sought to limit China’s access to the latest developments in AI.

But the move presents brighter prospects for Baidu’s AI ambitions, which have been a major money sink, and revenue earner for the Chinese internet giant in recent quarters. The firm ramped up development on its Ernie Bot model, and had begun rolling out AI products for consumer and enterprise applications over the past two quarters.

Apple’s potential adoption of Baidu comes just months after rival Samsung Electronics Co Ltd (KS:005930) integrated Baidu’s Ernie bot in its Galaxy S24 smartphone series in China. Outside China, Samsung uses Google’s AI models in its devices.

Apple was also recently reported to be in discussions with Alphabet's (NASDAQ:GOOGL) Google over the potential use of its Gemini AI in its iPhones. 

The Cupertino tech giant has somewhat lagged its peers in rolling out AI features over the past year. But media reports have shown that the firm is working on its own AI offerings and plans to integrate them into the next generation of its IOS software, IOS 18.

Apple and Baidu representatives did not immediately respond to a request for comment.

AI integration may help Apple spruce up its iPhone sales in China, which have fallen for four straight quarters amid increased government scrutiny and tighter competition from rivals such as Samsung and Huawei.