Baidu Rolls Out Reasoning Model Ernie X1 Amid Intensifying AI Race
Chinese tech firm Baidu has launched Ernie X1, a reasoning-based AI model, and made it freely accessible to chatbot users, moving up its original release schedule.
Elena Whitmore 
Ernie X1 aims to compete with DeepSeek's cost-effective performance
Baidu Inc., known for its dominance in China’s search engine market, has introduced a new artificial intelligence model called Ernie X1, designed with enhanced reasoning capabilities. The model operates similarly to DeepSeek R1, which gained industry attention for delivering high performance at significantly lower development costs. According to Baidu, Ernie X1 performs well in tasks involving complex calculations, daily conversations, and logical reasoning. This move appears to reflect the company’s intent to reposition itself in the face of increasing pressure from newer AI players.
Ernie 4.5 update and free access for all users
Alongside the release of Ernie X1, Baidu also announced an upgrade to its core foundation model, Ernie 4.5. The company made all service tiers—including the new X1 model—freely available to chatbot users, accelerating the rollout ahead of its initial timeline. This decision comes amid a broader industry trend of offering AI capabilities at reduced barriers to access, as companies compete not only on performance but also on availability and scalability.
Open-source shift and search engine integration
In a major strategic move, Baidu confirmed that it will open-source its Ernie AI models starting June 30. This follows the rising popularity of open-source platforms such as Alibaba’s Qwen and DeepSeek, which have been gaining traction among developers worldwide. In addition to open-sourcing its models, Baidu has integrated the R1 model into its own search engine, bringing generative AI capabilities directly into its core business offering.
Cloud revenue up, but ad sales remain weak
The company’s financial results from the December quarter showed a 26% increase in cloud revenue, fueled in part by growing demand for computing power among developers building AI tools. However, the overall positive impact of AI on earnings was moderated by declining advertising revenue, reflecting broader economic challenges in China.
Baidu completes $2.1 billion YY Live acquisition
Separately, Baidu finalized its long-delayed acquisition of the YY Live streaming platform from Joyy Inc., a deal valued at $2.1 billion. The closure of this deal unlocked approximately $1.6 billion that had been held in escrow accounts. According to the company, these funds will now be redirected toward further investment in AI and cloud infrastructure, reinforcing its long-term focus on expanding technological capabilities.
Navigating competitive headwinds in China's AI landscape
While Baidu was the first company in China to release a chatbot modeled after OpenAI’s ChatGPT, newer entrants like ByteDance Ltd. and Moonshot AI have quickly gained more traction among users. With the launch of Ernie X1 and the upcoming open-source release, Baidu is signaling a renewed effort to solidify its position amid an increasingly crowded and fast-evolving AI ecosystem.
