BEIJING — China’s Baidu plans to release the next generation of its artificial intelligence model in the second half of this year, according to a source familiar with the matter, as newer players such as DeepSeek disrupt the segment.

Ernie 5.0, called a “foundation model,” is set to have “big enhancements in multimodal capabilities,” the source said, without specifying its functions. “Multimodal” AI can process texts, videos, images and audio to combine them as well as convert them across categories — text to video and vice-versa, for instance.

Foundation models can understand language and perform a wide array of tasks including generating text and images, and communicating in natural language.

Baidu’s planned update comes as Chinese companies race to develop innovative AI models to compete with OpenAI and other U.S.-based companies. In late January, Hangzhou-based startup DeepSeek prompted a global tech stock sell-off with the release of its open-source AI model that impressed users with its reasoning capabilities and claims of undercutting OpenAI’s ChatGPT drastically on cost.

“We are living in an exciting time … The inference cost [of foundation models] basically can be reduced by more than 90% over 12 months,” Baidu CEO Robin Li said at the World Governments Summit in Dubai this week. That’s according to a press release of his fireside chat with Omar Sultan Al Olama, UAE’s minister of state for artificial intelligence, digital economy, and remote work applications.

“If you can reduce the cost by a certain percentage, then that means your productivity increases by that kind of percentage. I think that’s pretty much the nature of innovation,” Li noted.

Baidu was the first major Chinese tech company to roll out a ChatGPT-like chatbot called Ernie in March 2023. But despite initial momentum, the product has since been eclipsed by other Chinese AI chatbots from startups as well as large-tech companies such as Alibaba and ByteDance.

While Alibaba shares have soared 33% for the year so far, Baidu shares are up 6%. Tencent has notched gains of about 4% for the year so far. ByteDance is not listed.

Baidu’s Ernie model already supports the integration of generative AI across a range of the company’s consumer and business-facing products, including cloud storage and content creation.

Last month, Baidu said its Wenku platform for creating presentations and other documents had reached 40 million paying users as of the end of 2024, up 60% from the end of 2023. Updated features, such as using AI to generate a presentation based on a company’s financial filing, started being rolled out to users in January.

The current version of the Ernie model is Generation 4, released in Oct. 2023. An upgraded “turbo” version Ernie 4.0 was released in August 2024. Baidu has not officially announced plans to release the next generation update.

The latest version of OpenAI’s ChatGPT, GPT-4o, was released in May 2024. OpenAI CEO Sam Altman said in a Reddit “ask me anything” session earlier this month that there wasn’t a public timeline for GPT-5’s release.

Baidu did not respond to a request for comment.

Tesla shares dropped 6% on Tuesday after Chinese rival BYD announced plans to develop autonomous vehicle technology with DeepSeek, and said it would offer its Autopilot-like system in nearly all of its new cars, adding to fears that Elon Musk’s company is falling behind the competition.

There’s also growing concerns surrounding Musk’s distractions outside of Tesla, after news surfaced that the world’s richest person is offering to lead an investor group in purchasing OpenAI, while he steps up his work with President Donald Trump’s White House.

Tesla’s stock price has slid for five straight days, falling close to 17% over that stretch to $328.50, and wiping out over $200 billion in market cap.

BYD, which has emerged as Tesla’s fiercest rival on the world stage, said on Monday that at least 21 of its new model vehicles will come equipped with its partially automated driving systems that include features for automatic parking and navigating on highways.

Tesla doesn’t yet offer a robotaxi and its EVs currently require a human driver to remain at the wheel, ready to steer or brake at any time. On Tesla’s earnings call last month, Musk said the company is aiming to launch “Unsupervised Full Self-Driving,” and a driverless rideshare service in Austin, Texas, in June. Alphabet’s Waymo already operates a robotaxi service in Austin as well as in parts of Phoenix, San Francisco.

“In our view, competition between Waymo, Tesla and a host of Chinese players is a key driver on the path to commercialization” of robotaxis,” Morgan Stanley analysts wrote in a note to clients after the BYD announcement. The firm recommends buying the stock and has a price target of $430.

Waymo said on Tuesday that it added 10 square miles of coverage to its robotaxi service in Los Angeles.

In a report on Tuesday, Oppenheimer analysts wrote that the “autonomy competition may limit [Tesla] profitability.” Even if Tesla meets its June 2025 timeline for driverless cars in Texas, the company is “one of several autonomous technology providers, suggesting competition on price and performance,” they wrote.

In addition to running Tesla, Musk is CEO of SpaceX, owns social media company X and is head of artificial intelligence startup xAI. He’s also spending significant time these days in Washington, D.C., running the “Department of Government Efficiency” (DOGE) as a special government employee, aiming to slash federal spending, personnel, regulations and even entire agencies.

Altman told employees in a memo on Tuesday that OpenAI’s board hasn’t received an official offer from Musk and reminded staffers that “Elon has a history of making claims that don’t hold up.” 

Later on Tuesday, Toberoff said in a statement that he emailed the bid for OpenAI on behalf of the Musk-led consortium a day earlier to OpenAI’s outside counsel William Savitt and Sarah Eddy “for transmission to their client.” Toberoff said the bid was “in the form of a detailed four-page letter” and was addressed to OpenAI’s board.

“Whether Sam Altman chose to provide or withhold this from OpenAI’s other Board members is outside of our control,” he wrote.

Oppenheimer’s analysts also highlighted the added risks associated with Musk’s extensive work with the Trump administration.

While Musk’s behavior “has fans in certain circles,” his public life “risks alienating consumers and employees as the Trump administration tests the limits of its power,” they wrote. For example, they referenced recent vehicle registration data that showed steep year-over-year declines in California and across several European markets.

Tesla and Musk didn’t immediately respond to a request for comment.

WATCH: Tesla still on track

Amazon is opening a beauty and health products store in Milan, Italy, marking the company’s latest brick-and-mortar experiment.

The store is located in the city center of Milan, and features a range of beauty and personal care items, as well as nonprescription drugs, Amazon said in a blog post. The first store, which is called Amazon Parafarmacia & Beauty, will open its doors to the public on Wednesday.

The store will be stocked with products from beauty and skin-care brands including La Roche-Posay, Eucerin and Vichy. There are also “Derma-bars,” where shoppers can get a “complimentary digital skin analysis” of their skin type and condition, and receive product recommendations.

Amazon says the store includes a section staffed by on-site pharmacists where shoppers can purchase “non-prescription, over-the-counter medications.”

By launching its first “parapharmacy,” the e-commerce giant is hoping to parlay its online success in the beauty and personal care category into sales in the physical world. Beauty and personal care items, which include everything from hairspray and cosmetics to deodorants and Q-tips, make up one of the fastest-growing verticals on Amazon.

The company began offering health and beauty products in 2000, but its selection was initially limited to most mass-market brands. It has since added more luxury brands such as Estée Lauder and La Mer.

The new store format also marks Amazon’s latest experiment in physical retail. The company opened and then shuttered all of its bookstores, pop-up shops, four-star stores and apparel stores. It has also shrunk its footprint of Amazon Go convenience stores, shutting down a storefront in Woodland Hills, California, last month. In grocery, Amazon’s portfolio includes Whole Foods supermarkets and its own chain of Fresh stores.