ChatGPT is the talk of the town and the Chinese stock market is in a frenzy over this new and advanced AI product. Though ChatGPT is off-limits to Chinese users, technology giants like Alibaba and Baidu are planning to launch rival solutions for Chinese consumers.

ChatGPT (Chat Generative Pre-trained Transformer) is an advanced Chatbot developed by the American AI company OpenAI. The chatbot which was initially made to mimic a human speaker, can do multiple functions like write and debug programs, compose music and poetry, write stories and essays, translate multiple languages, take tests, create and maintain entire chat rooms, play games, say jokes, and more. The chatbot, which was launched in November 2022, is the fastest-growing consumer app in history. 

What is the ChatGPT-related Stock Frenzy?

After the release of ChatGPT, the developing company OpenAI’s valuation rose to $29 billion. As ChatGPT became the new buzzword and the chatter around artificial intelligence increased, many AI companies saw a record-breaking rise in their share price. The software firm C3.ai Inc saw an 11% rise in its price, while the share price of analytics firm BigBear.ai jumped 21%. The conversation AI company SoundHound AI saw a record rise of almost 40% in its share price. 

Many Chinese technology and AI companies are also riding on the viral success of ChatGPT. Though China will never allow the chatbot openly into its network, many technology giants and startups have pledged to create alternative solutions and substitute technology that can provide services similar to ChatGPT. 

Shares of AI technology companies such as Hanwang Technology Co, TRS Information Technology Co, and Cloudwalk Technology Co saw a shocking rise in the past week. These companies are nowhere near releasing an app or software like ChatGPT. In fact, both Hanwang Technology Co which makes intelligent interaction products, and the facial recognition software developer Cloudwalk technology have reported losses in 2022. 

Warnings against AI stock speculation.

Cloudwalk technology cautioned its investors about the AI fervor and said that it has no collaborations or partnerships with OpenAI and has not developed or sold any products or services related to ChatGPT.  

Market experts are warning people from getting involved in the ongoing AI frenzy. Vey-Sern Ling, MD of Union Bancaire Privee said that the financial benefits of ChatGPT and related technology are still not clear. He further added that apart from companies with the strongest technical capabilities, the rest are probably just riding the wave and such hype-driven rallies are never sustainable.

Within a week, the price surge of AI stocks has stretched valuations and broken records. TRS Information Technology is trading sixty times its earnings, while Haitian Ruisheng Science Technology Ltd’s price-to-earnings ratio (PE) is more than 240 (the average PE of Nifty in the last 20 years was around 20)

Chinese regulators have started warning people against AI stocks. As per reports, last week, three tech companies were called in for inquiry by regulators after their shares rose by more than 30% within a week.  A prominent newspaper in China published a front-page warning Ad for investors and consumers, urging them to stay away from the ChatGPT frenzy. 

Retail investor Lu Deyong said that ChatGPT is just a hot idea but a great opportunity for retail investors, who prefer smaller stocks like these to make some quick money. He further added that though the ChatGPT frenzy is rallying the Chinese stock market, China is still not ready to realize such technology in the near future.

To date, no AI company in China has announced any product or service that can compete purely with ChatGPT. The closest competition, for now, seems to be from the Chinese search engine giant Baidu, which is planning to launch its AI chatbot the ‘Ernie Bot’ in March. 

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