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CEO of writer.com May Habib attends the Harper’s Bazaar At Work Summit, in partnership with Porsche and One&Only One Za’abeel, at Raffles London at The OWO on November 21, 2023 in London, England.

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San Francisco-based AI startup Writer debuted a large artificial intelligence model on Wednesday to compete with enterprise offerings from OpenAI, Anthropic and others. But, unlike some of those competitors, it doesn’t need to spend as much to train its AI.

The company told CNBC it spent about $700,000 to train its latest model, including the data and GPUs, compared to the millions of dollars competing startups spend to build their own models. Its strategy has caught the attention of investors.

Writer is raising up to $200 million at a $1.9 billion valuation, according to a source familiar with the situation who spoke with CNBC. That’s nearly quadruple the company’s valuation last September, when it raised $100 million at a valuation of more than $500 million.

The company cuts costs using synthetic data, or data created by AI. It’s designed to mimic the real-world information that’s usually fed into models without compromising privacy and is becoming a more popular method for training.

A study by AI researchers revised in June found that if current AI development trends continue, tech companies will “fully exhaust” the publicly available training data between 2026 and 2032, writing that “human-generated public text data cannot sustain scaling beyond this decade.”

Amazon has used synthetic data in training Alexa, Meta has used it to fine-tune its Llama models and Microsoft-backed OpenAI is incorporating it into its models, according to job descriptions posted by the company. Some experts, however, have warned that synthetic data should be used cautiously, as it has the potential to degrade model performance and exacerbate existing biases.

Waseem Alshikh, Writer’s co-founder and CTO, told CNBC that Writer has been working on its synthetic data pipeline for years.

“There’s some confusion in the industry about the definition of ‘synthetic’ data,” Alshikh said. “To be clear, we don’t train our models on fake or hallucination data, and we don’t use a model to generate random data… We take real, factual data and convert it to synthetic data that is specifically structured in a clearer and cleaner way for model training.”

The company’s generative AI allows corporate clients to use its large language models (LLMs) to generate human-sounding text for anything from LinkedIn posts to job descriptions to mission statements, as well as data analysis and summarization. The company has more than 250 enterprise customers, including Accenture, Uber, Salesforce, L’Oreal and Vanguard, who use the tech across sectors like support, IT, operations, sales, and marketing.

The generative AI market is poised to top $1 trillion in revenue within a decade. To date in 2024, investors have pumped $26.8 billion into 498 generative AI deals, according to PitchBook, and companies in the sector raised $25.9 billion in 2023, up more than 200% from 2022.

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Baidu, once China’s generative AI leader, is battling to regain its position

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Baidu, once China’s generative AI leader, is battling to regain its position

Pictured here is the Ernie bot mobile interface, with the Baidu search engine home page in the background.

Future Publishing | Future Publishing | Getty Images

Chinese tech giant Baidu has released two new free-to-use artificial intelligence models as it vies to regain its leading position in the country’s fiercely competitive AI space. 

The Baidu models launched Sunday included the company’s first reasoning-focused model, and come ahead of plans to move toward an open-source strategy. 

However, experts told CNBC that while the release of the models is a positive development for Baidu, they also highlight how it is playing catch up as its Ernie bot — one of China’s earliest versions of a ChatGPT-like chatbot — struggles to gain widespread adoption. 

“The new models make Baidu more competitive since the company has been lagging behind in a reasoning model release,” Lian Jye Su, chief analyst at Omdia, told CNBC.

A reasoning model is a large language model that breaks down tasks into smaller pieces and considers multiple approaches before generating a response. It is designed to process complex problems in a similar way to humans.

Chinese startup DeepSeek upended the global AI race and transformed China’s ecosystem in January when it released its R1 reasoning model, which rivaled American competitors despite costing a fraction of the price.

Baidu has said its new ERNIE X1 reasoning model “delivers performance on par with DeepSeek R1 at only half the price,” and has “stronger understanding, planning, reflection, and evolution capabilities.” CNBC has not been able to independently verify this claim.

According to Wei Sun, principal analyst of artificial intelligence at Counterpoint Research, Baidu’s future competitiveness could hinge on whether its new models deliver on the promised performance and cost advantages. 

“Baidu is clearly in catch-up mode, largely due to its slow innovation pace and underestimating rapid shifts in market dynamics,” Sun said. 

What happened? 

Baidu rolled out its first generative AI platform to the public in 2023, giving China one of its first answers to OpenAI’s popular AI chatbot ChatGPT. 

However, despite initial momentum, Baidu’s Ernie product has since been eclipsed by competitors including startups as well as large-tech companies such as Alibaba and ByteDance.

Experts list a number of reasons for Baidu’s struggles and slow rate of innovation.

“Baidu fell behind when they tried to build proprietary models and compete for funding for AI,” Ray Wang, principal analyst and founder of Constellation Research, told CNBC. He added that the company has also suffered from recent government crackdowns and was distracted by “regulatory nonsense.” 

CFOTO | Future Publishing | Getty Images

Proprietary models keep their source code and underlying architecture confidential, in contrast to models from the likes of DeepSeek, whose source code is made freely available on the open web for possible modification and redistribution.

“Using a closed-source approach means that [Baidu] was training its model from scratch whereas the open-source models were able to leverage certain parts that were communal to developers,” said Kai Wang, a senior equity analyst for Morningstar. 

Baidu, however, said last month that it would make its next-generation AI model Ernie open-source from June 30, according to Reuters.

“Baidu has always been very supportive of its proprietary business model and was vocal against open source, but disruptors like DeepSeek have proven that open source models can be as competitive,” said Omdia’s Su. 

He added that Baidu is “merely following the footstep” of its biggest competitors in China, namely Alibaba, DeepSeek, and Tencent, which have all now released open-source models. 

Baidu’s advantages

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Baidu shares jump 10% following release of new open-source AI models

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Baidu shares jump 10% following release of new open-source AI models

ZHEJIANG, CHINA – MARCH 16 2023: A view of the logo of ERNIE Bot, an AI chatbot service developed by Chinese search engine Baidu, March 16, 2023.

Long Wei | Future Publishing | Getty Images

Shares of Chinese tech giant Baidu were trading up 10.7% in Asia on Tuesday, as investors appeared to react positively to the release of two new AI models over the weekend.  

Baidu released two new artificial intelligence models on Sunday, including the latest version of its foundational “Ernie” model and a new reasoning model that it said rivaled DeepSeek’s R1 model. CNBC is not able to verify these claims.

A reasoning model is a large language model designed to process complex problems in a similar way to humans, breaking prompts down into smaller pieces and considering multiple approaches before generating responses. 

According to Kai Wang, a senior equity analyst for Morningstar, the stock jump is likely a “delayed reaction” to the new models as Baidu vies to regain a leading position in China’s AI space. 

“The stock also hasn’t gotten as much love as the other hyperscalers but still it’s a platform that stands to benefit from greater AI demand since enterprises will need someone to help them with hosting, scaling, and computing power,” he said.

A hyperscaler refers to a major cloud computing company that provides massive data centers for computing storage and demands.

Baidu said on Sunday that its ERNIE X1 reasoning model “delivers performance on par with DeepSeek R1 at only half the price,” and has “stronger understanding, planning, reflection, and evolution capabilities.”

Chinese AI start-up DeepSeek upended the AI industry in January when it released its R1 open-source reasoning model, which rivaled models of American competitors, despite claims it was produced at a fraction of the cost and with far less powerful chips.

DeepSeek quickly overtook Baidu in China’s AI race, despite the company being one of the first in the market to launch a ChatGPT-like chatbot with its Ernie Bot, according to Wei Sun, principal analyst of artificial intelligence at Counterpoint Research, who noted other tech giants like Alibaba and Bytedance have also pulled ahead.

“Baidu’s competitiveness hinges on whether its new models truly deliver on the promised performance and cost advantages,” Sun said, noting, however, that AI pricing, particularly in China’s market, is highly fluid.

Baidu’s latest models, similarly to DeepSeek’s R1, have been released as open-sourced, meaning the source code is freely available on the open web for possible modification and redistribution. 

This represents a change from Baidu’s prior strategy of focusing on proprietary models. 

“By open-sourcing its models, Baidu seeks to once again position its technology as an industry standard, strengthening its influence in the AI community and expand its market share,” said Sun.

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Software startup Rippling sues competitor Deel, claiming a spy carried out ‘corporate espionage’

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Software startup Rippling sues competitor Deel, claiming a spy carried out 'corporate espionage'

Co-founder & CEO of Rippling Parker Conrad speaks onstage during the TechCrunch Disrupt conference in San Francisco on Oct. 20, 2022

Kimberly White | TechCrunc | Getty Images

Human resources software startup Rippling sued competitor Deel in federal district court on Monday, claiming that “Deel cultivated a spy” to orchestrate a trade-secret theft.

The employee met with Deel executives and passed internal Rippling records to a reporter, according to San Francisco-based Rippling’s complaint in the U.S. District Court for California’s Northern District.

Rippling claimed in the filing Deel violated the 1970 Racketeer Influenced and Corrupt Organizations Act and misappropriated trade secrets.

The two startups are among the most world’s most valuable. Investors valued Rippling at $13.5 billion in a funding round announced last year, while Deel told media outlets in 2023 that it was worth $12 billion. Deel ranked No. 28 on CNBC’s 2024 Disruptor 50 list.

“Weeks after Rippling is accused of violating sanctions law in Russia and seeding falsehoods about Deel, Rippling is trying to shift the narrative with these sensationalized claims,” a Deel spokesperson told CNBC in an email. “We deny all legal wrongdoing and look forward to asserting our counterclaims.”

Rippling confirmed its findings earlier this month. The company’s general counsel sent a letter to three Deel executives that referred to a new Slack channel, and the Deel spy quickly looked for it. Rippling subsequently served a court order to the spy at its office in Dublin, Ireland requiring him to preserve information on his mobile phone.

“Deel’s spy lied to the court-appointed solicitor about the location of his phone, and then locked himself in a bathroom — seemingly in order to delete evidence from his phone — all while the independent solicitor repeatedly warned him not to delete materials from his device and that his non-compliance was breaching a court order with penal endorsement,” Rippling said in Monday’s filing. “The spy responded: ‘I’m willing to take that risk.’ He then fled the premises.”

Rippling hired the person whom it calls the Deel spy for a management role in 2023, as the two companies were becoming more competitive, the filing says. Deel had used Rippling’s software, but Rippling opted to not renew Deel’s contract, according to the legal filing.

The spy repeatedly accessed information about Rippling customers, quotes, sales calls, demos and support requests in internal Slack repositories, according to the filing. He found and downloaded Rippling’s guidance on how to go up against Deel for prospective business, too, the filing says.

Then, in February, a reporter at The Information sent an inquiry to Rippling that included Slack messages from inside Rippling, which the startup concluded were collected by the Deel spy, the filing says. Additionally, email records suggest that the spy met with Deel executives in December, Rippling said in the complaint.

“We always prefer to win by building the best products and we don’t turn to the legal system lightly,” Parker Conrad, Rippling’s co-founder and CEO, said in a Monday X post. “But we are taking this extraordinary step to send a clear message that this type of misconduct has no place in our industry.”

This isn’t Conrad’s first legal entanglement over data access. In 2015, ADP dropped a defamation lawsuit that claimed his previous HR startup, Zenefits, had obtained information from clients in order to provide them with payment processing services.

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