Amid China’s ChatGPT hype, an e-book maker inexplicably stood out in stock market

The release of ChatGPT-3.5, Open AI’s chatbot, has sparked a new round of Artificial Intelligence (AI) craze – or more precisely, a generative AI boom – around the world. Companies are racing to launch their own ChatGPT competitors, and investors are eager to get in on this cutting-edge technology.

Similar trends can be observed in China, a rising AI patent powerhouse. Even though a ChatGPT-like product hasn’t yet been released in the country, the hype has already swept the market. Stocks of companies involved in AI, such as AI training data provider SpeechOcean and iFlytek, which develops voice recognition software, have risen dramatically.

Strangely enough, on the secondary market, the most sought-after target was Hanvon, or Hanwang Technology, a company that specializes in making drawing tablets, e-readers, and scanners. The Shenzhen Stock Exchange-listed company has reached its daily price increase limit for 7 consecutive trading days, and its stock price rose from 18.41 yuan ($2.71) per share on January 30 to 32.63 yuan ($4.80) on February 7. (Chinese securities regulator imposes a daily price up/down limit of 10% on the trading of shares and mutual funds.)

Despite its reputation as a device maker, the company actually has several AI technologies on hand, including facial/biometric recognition technology, natural language processing (NLP) technology, optical character recognition (OCR) technology, and more. That’s why the ChatGPT hype mongers are eyeing it.

However, according to the company’s 2022 half-yearly report, its “Text and Big Data” business, which is mainly supported by NLP and OCR technologies, contributed only 13% of revenue.

The company seems to be condoning the hype. In light of recent stock price volatility, Hanwang issued a statement in which it tried to make its own NLP technology appear to be moving closer to ChatGPT, and claimed that NLP would play a significant role in its future development.

On the contrary, other companies that were hyped by the concept have issued statements distinguishing their offerings from OpenAI’s ChatGPT. For instance, CloudWalk Technology, a facial recognition software developer, and SpeechOcean issued announcements stating that they did not work with OpenAI and ChatGPT’s products and services did not bring any revenue to them.

While the share prices of others started to fall after their statements, Hanwang’s “ambiguous attitude” encouraged investors to keep bidding up its stock: even though it doesn’t have any generative AI-related products or chatbots with multi-round conversation capabilities.

The Shenzhen Stock Exchange, however, noticed this. On February 7, the bourse demanded details about Hanwang’s NLP business, including the NLP-related products, applications, research and development spending, and financials. In addition, the authority asked the company to verify whether or not any insider trading had occurred.

It’s worth noting that, Hanwang, established in 1998, may seem like an out-of-date electronic devices maker, but it makes headlines for unexpected reasons occasionally.

The Beijing-based company has previously clashed with Apple over iPhone trademark rights. It had applied for the “i-phone” trademark for its mobile phone in China in 2004, but as Apple later launched its smartphone, the iPhone, in this emerging market, things got tricky: similarities between “i-phone” and “iPhone” means that it may be illegal for Apple to sell iPhones in China without resolving the issue. After bilateral negotiations, Hanwang transferred ownership of its “i-phone” trademark to the US tech giant in 2010 for $8 million.

Anyway, generative AI will play an increasingly critical role in improving productivity, and the race is heating up. Google released Bard, which uses Google’s Language Model for Dialogue Applications, or LaMDA on Monday, while Baidu, China’s top search engine company, is set to launch a chatbot similar to ChatGPT in March. Then, the release of GPT-4 is also planned for this year. So, stay away from irrational hype and focus on companies that are really committed to it.