The move: Baidu's American depository receipts climbed 1.23% in pre-market trading on Monday, reaching $94.97 per share. The Chinese search engine firm is up 11.62% year-to-date.

Why: The firm's US-listed shares are gaining after it announced Ernie X1, an artificial intelligence model on par with China's breakthrough DeepSeek tool. Ernie, which can reason, analyze, and generate images, is said to be as capable as DeepSeek but cheaper to run.

Baidu also revealed an update to its foundational AI model, Ernie 4.5, which it claims can outperform OpenAI's GPT-4.5.

The Chinese internet firm has been one of the earliest AI competitors in the country.

What it means: Ernie X1 is the latest development in a long line of AI releases coming out of China. In March alone, Alibaba showed off its own DeepSeek rival, while others, such as Tencent, have also revealed AI tools.

These haven't been happy developments for American tech mega-caps, which increasingly seem to be cost-inefficient compared to Chinese rivals. When DeepSeek's cheaper model shook Wall Street in January, investors began reassessing the sustainability of massive AI spending.

That's also sparked questions about hardware demand, creating a headwind for dominant chipmakers, such as Nvidia. The flagship AI chip maker is down 9% this year.

Meanwhile, a sentiment shift in Beijing may also be helping Chinese equities, particularly tech. After a lasting regulatory tech crackdown from China's top brass, the government has recently signaled an embrace of its tech sector . The result has been a student resurgence in China's stock market after investors fled in 2024.

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