Baidu Shakes AI Market with ERNIE 4.5 Turbo & X1 Turbo - Slashing Prices by 80%, Stocks Jump 5%

Baidu's Strategic AI Evolution: New Models at Breakthrough Prices

In a significant move that has sent ripples through the global AI industry, Chinese tech giant Baidu unveiled two cutting-edge artificial intelligence models on April 25, 2025, at its annual developer conference, Baidu Create 2025. The company introduced ERNIE 4.5 Turbo and ERNIE X1 Turbo, both featuring enhanced multimodal capabilities, stronger reasoning abilities, and dramatically reduced costs compared to their predecessors and competitors.

These new releases come just a month after Baidu's March 16 launch of ERNIE 4.5 and ERNIE X1, which had already garnered positive market reception. The rapid iteration of these models demonstrates Baidu's aggressive strategy to establish dominance in China's increasingly competitive artificial intelligence market, particularly against rivals like Alibaba Group and the rising star DeepSeek.

The announcement triggered an immediate positive market response, with Baidu's shares surging over 5% in Hong Kong trading on the day of the announcement. This enthusiastic investor reaction underscores the market's confidence in Baidu's AI innovation trajectory and competitive positioning.

Cost Revolution: Making Advanced AI Accessible

Perhaps the most striking aspect of Baidu's new AI models is their revolutionary pricing structure. ERNIE 4.5 Turbo is being offered at just 20% of the cost of its predecessor ERNIE 4.5, representing an extraordinary 80% price reduction. Similarly, ERNIE X1 Turbo is available at half the price of the original ERNIE X1.

This aggressive pricing strategy positions Baidu's offerings at a significant advantage against competitors. ERNIE 4.5 Turbo costs approximately 40% less than DeepSeek's V3 large language model, while ERNIE X1 Turbo is priced at just 25% of DeepSeek's R1 reasoning model.

During his keynote address at the developer conference in Wuhan, Baidu's co-founder, chairman and CEO Robin Li emphasized the strategic importance of this pricing approach: The essence of innovation is the lowering of cost. This would help developers focus on creating more super interesting and useful AI applications, rather than worrying about the expense involved in foundational AI models.

Li's statement reflects a profound understanding of the market dynamics - by dramatically reducing the cost barrier to advanced AI capabilities, Baidu is positioning itself to capture a larger share of the developer ecosystem and accelerate AI application development across various industries.

Technical Advancements: Multimodal Capabilities and Reasoning Power

Beyond their competitive pricing, ERNIE 4.5 Turbo and ERNIE X1 Turbo represent significant technical advancements in AI capabilities. ERNIE 4.5 Turbo delivers faster response times while reducing hallucination phenomena in AI interactions - a critical improvement for practical applications. The model demonstrates comprehensive progress in hallucination reduction, logical reasoning, and coding abilities.

The multimodal capabilities of ERNIE 4.5 Turbo are particularly noteworthy, with Baidu claiming performance on par with GPT-4.1 and superior to GPT-4o across multiple benchmarks. This multimodal functionality enables the model to process and generate various types of content spanning text, images, audio, and video - a capability that Robin Li identified as essential for future foundational models.

ERNIE X1 Turbo, the upgraded deep thinking reasoning model, features a more advanced chain of thought, stronger deep thinking capabilities, and enhanced multimodal and tool invocation abilities. According to Baidu, it excels in Q&A, literary creation, and logical reasoning, outperforming competitors like DeepSeek R1.

To achieve these advancements, Baidu has incorporated sophisticated technologies such as a heterogeneous multimodal mixed-experts system and FlashMask, a dynamic attention masking feature that enhances the model's performance across various tasks.

Expanding the AI Ecosystem: Xinxiang and Digital Humans

Complementing its core model releases, Baidu also unveiled an array of innovative AI applications designed to showcase the practical potential of its technology. One of the most notable is Xinxiang, a multi-agent collaboration application that can execute complex tasks from a single sentence prompt.

This application demonstrates Baidu's vision of AI's practical utility - moving beyond theoretical capabilities to real-world problem-solving. Xinxiang intensifies competition with Chinese service Manus AI and represents Baidu's commitment to creating intuitive, powerful AI tools that can be easily integrated into everyday workflows.

Additionally, Baidu presented highly convincing digital humans featuring realistic voices and appearances. These digital avatars showcase the company's advancements in multimodal AI integration, combining speech synthesis, visual rendering, and natural language understanding to create compelling virtual presences.

The company also announced an AI Open Initiative and the integration of its Model Context Protocol (MCP) into existing products. This initiative aims to provide developers with traffic and revenue generation opportunities while simplifying the connection between external services and large-scale models. By streamlining the development process, Baidu is working to lower barriers to entry for AI application creators and foster a more vibrant ecosystem around its technologies.

Strategic Vision: Applications as the Future of AI

Throughout the conference, Robin Li articulated a clear strategic vision for Baidu's AI development, emphasizing that the true value of AI lies not in advanced models or chips but in practical applications. Without practical applications, neither advanced chips nor sophisticated models hold value, Li stated during his keynote address. While there will be a multitude of models, it is the applications that will truly dominate in the future. Applications are where true power lies.

This application-centric philosophy guides Baidu's approach to AI development and explains the company's focus on creating not just powerful models but also accessible, affordable, and practical AI tools. By reducing costs and enhancing usability, Baidu aims to accelerate the proliferation of AI applications across various industries and use cases.

Li also predicted that the market for AI models that can only process text prompts will shrink, while the market for multimodal AI models will continue to expand. This forecast aligns with Baidu's investment in comprehensive multimodal capabilities for both ERNIE 4.5 Turbo and ERNIE X1 Turbo, positioning the company at the forefront of this anticipated market shift.

Competitive Landscape: China's AI Race Intensifies

Baidu's latest announcements come amid an increasingly competitive landscape in China's artificial intelligence sector. As one of the pioneering technology firms in China to introduce a ChatGPT-like chatbot, Baidu has faced challenges in achieving widespread adoption for its ERNIE large language model despite asserting performance comparable to OpenAI's GPT-4.

The emergence of competitors like ByteDance Ltd., Moonshot AI, and particularly DeepSeek has intensified the competition. DeepSeek has gained significant attention for claiming that its offerings match or exceed leading U.S. models while being substantially more affordable, reinvigorating the global AI race.

Alibaba's Qwen5-V and ByteDance's offerings have also gained traction in the market, pushing Baidu to accelerate its innovation and pricing strategy. The company's response with ERNIE 4.5 Turbo and ERNIE X1 Turbo demonstrates its determination to maintain a leadership position in this rapidly evolving landscape.

Looking ahead, Baidu has ambitious plans for continued AI development, with the anticipated launch of ERNIE 5 slated for the latter half of 2025. Despite the cost-saving advancements made by rivals, Baidu emphasizes that ongoing investment in cloud infrastructure and data centers remains essential for maintaining its competitive edge in AI technology.

Financial Implications and Market Response

Baidu's AI innovations are backed by solid financial fundamentals. The company boasts a market capitalization of $30.77 billion and has received a GREAT financial health rating from InvestingPro. With a strong liquidity ratio of 2.09 and earnings per share of $9.04, Baidu demonstrates robust financial performance while advancing its AI innovations.

The market has responded positively to Baidu's latest AI announcements. Following the April 25 unveiling of ERNIE 4.5 Turbo and ERNIE X1 Turbo, Baidu's shares surged over 5% in Hong Kong trading. This follows a pattern of strong market performance, with the company's stock having jumped more than 11% in March following the initial release of ERNIE 4.5 and ERNIE X1.

These market movements reflect investor confidence in Baidu's AI strategy and its potential to capture significant market share in the rapidly growing AI sector. The combination of technical innovation, aggressive pricing, and clear strategic vision appears to be resonating with investors who see Baidu as well-positioned to compete effectively against both domestic and international AI rivals.

Conclusion: Democratizing Advanced AI

Baidu's latest AI models represent more than just technical advancements - they signal a fundamental shift in the accessibility and affordability of cutting-edge AI capabilities. By dramatically reducing costs while enhancing performance, Baidu is democratizing access to advanced AI technologies that were previously available only to organizations with substantial resources.

This democratization has far-reaching implications for the broader AI ecosystem. As costs decrease, more developers and businesses can experiment with and deploy sophisticated AI solutions, potentially accelerating innovation across various industries and use cases.

Robin Li's emphasis on applications as the true future of AI reflects a mature understanding of technology adoption dynamics. By focusing on making AI not just powerful but also practical, affordable, and accessible, Baidu is positioning itself to lead the next phase of AI evolution - one where the technology's impact is measured not by theoretical capabilities but by real-world utility and widespread adoption.

As the global AI race continues to intensify, Baidu's strategic combination of technical innovation, cost reduction, and application focus provides a compelling roadmap for how Chinese tech companies can compete effectively on the world stage while addressing the specific needs and opportunities of their domestic market.