Technology company Baidu on Monday refuted a newspaper report that said its artificial intelligence chatbot Ernie was linked to Chinese military research.

Hong Kong newspaper South China Morning Post on Friday cited an academic paper from a university affiliated with the People's Liberation Army cyberwarfare division. The paper stated that the division had tested its artificial intelligence system on Baidu's Ernie and on artificial intelligence firm iFlyTek's Spark, both of which are language-based AI chatbots similar to ChatGPT.

After its Hong Kong-listed stock plunged more than 11.5% Monday, Baidu denied the allegations, saying in a statement that it had not engaged in a business collaboration with the paper's authors or their affiliated institutions.

"Ernie Bot is available to and used by the general public," the Chinese company said in its statement.

The academic paper from the PLA Information Engineering University detailed how researchers had given Ernie Bot prompts to generate simulated military response plans for Libyan troops in response to a U.S. military attack.

Baidu said that if the authors employed large language models such as Ernie Bot, they would have used the functions available to any user interacting with such AI tools.

Like ChatGPT, users can pose questions or requests to Ernie Bot, which would then generate content based on the initial prompt. Like many other internet services in China, Ernie Bot is also subject to censorship rules and will not answer questions deemed politically sensitive or taboo by the Chinese government.

The South China Morning Post report initially described a "physical link" between Ernie and the PLA division. The reference has since been amended to say that the PLA lab had tested its system on Baidu's AI model.

The plunge in Baidu's stock price underscored fears from investors that Chinese technology firms linked to the Chinese military or government could be sanctioned by the U.S. in a similar fashion to Chinese telecommunications giant Huawei, which the U.S. sees as an espionage risk.

Relations between China and the U.S. have declined in recent years over disagreements on trade, technology and issues related to Taiwan, a self-ruled island and U.S. ally that China regards as a renegade province to be taken by force if necessary.

Baidu, which operates China's leading search engine and is one of the country's leading artificial intelligence firms, made Ernie Bot available to the public in August 2023 amid a race among Chinese technology firms to produce China's ChatGPT equivalent.

The Beijing-headquartered firm said in December that it had more than 100 million users for Ernie Bot.

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