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Baidu Forges an AI Pact with Huawei

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The making of an AI-first company

Baidu (BIDU) and Huawei forged an alliance that could see the companies cooperate in artificial intelligence (or AI) work. The two Chinese companies, one a leader in Internet search services and the other a leader in telecom equipment and smartphones, intend to collaborate in developing AI technologies and promoting the uptake of AI products.

The companies hope their alliance could give rise to more useful consumer devices, especially smartphones of the future.

For Baidu, the deal with Huawei fits with its ambition to be an AI-first company. The company invests $1.5 billion in R&D (research and development) annually, and most of the funds are dedicated to AI research.

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Baidu eyeing autonomous driving market

One of Baidu’s AI products is Apollo, an open-source platform for self-driving vehicles. Baidu recently said that it was on track to launch a fully self-driving bus in China (MCHI) in 2018.

Baidu’s Apollo program has attracted more than 70 global partners, including Microsoft (MSFT), Ford (F), Intel (INTC), and NXP Semiconductors (NXPI).

In addition to emerging technology sectors such as autonomous driving, Baidu’s AI work is also important for its core Internet search business. For example, it could leverage AI to serve more relevant online ads.

This scenario could generate more revenues and higher returns on investment for its advertising clients. Advertising sales represented 85.5% of Baidu’s total revenues in 3Q17.

AI-powered smartphones

For Huawei, the merger with Baidu with respect to AI could help it compete more effectively with Apple (AAPL) and Samsung (SSNLF) for the control of the market for AI-powered smartphones.

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