Baidu Inc. reported a 3% decline in sales, marking its largest sales drop since 2022, attributed to challenges in the Chinese market and increased competition in artificial intelligence. The company's Q3 revenue and net profit both fell, despite a significant surge in daily usage of its AI tool, Ernie Bot, which increased 30-fold. Baidu's CEO, Robin Li, expressed optimism that generative AI could transform Baidu's search capabilities into a new 'killer app.' In a recent earnings call, Baidu highlighted improvements in its AI capabilities, with the Ernie 4.0 Turbo model achieving a 48% increase in inference efficiency since June. However, Barclays downgraded Baidu's stock to Equal-Weight, reducing its price target from $115 to $83, citing pressure on advertising revenue due to the shift towards generative AI. Baidu plans to release a new version of its AI model, Ernie, early next year, with current daily API requests reaching 1.5 billion.