In a surprising turn of events, Naver Corporation, South Korea’s leading online portal, has witnessed a substantial nosedive in its market capitalization, losing nearly W4 trillion in value. The dramatic decline comes on the heels of the highly anticipated launch of their generative artificial intelligence program, HyperCLOVA X, which had generated significant buzz in the market. As the program failed to live up to its expectations and encountered a slew of issues, investors and analysts alike are left questioning the future prospects of Naver’s AI venture.
Naver Corporation’s once-soaring market cap, which had reached a yearly high of W38.4 trillion on August 7, took a nosedive, falling to W34.7 trillion by Tuesday, leaving investors in shock. While the company had been riding high with its stock price climbing steadily from W180,000 per share to W240,000 in early August, all hopes were pinned on HyperCLOVA X, a generative AI program that Naver had invested more than W1 trillion in developing and customizing for the Korean market.
Hyped AI program’s reality check
The day HyperCLOVA X was unveiled, it managed to drive Naver’s stock price up by 6.2 percent, eliciting optimism among investors. The euphoria was short-lived as the AI program’s performance proved to be far from satisfactory. Just one day later, Naver’s stock plummeted by 7.8 percent as negative reviews began pouring in.
Many users reported frustrating delays in accessing the service due to an overwhelming surge in traffic. While Naver initially assured users that these technical issues would be resolved, the problems persisted. The program also garnered criticism for providing numerous incorrect answers, undermining its credibility.
According to a concerned investor, there was significant initial excitement surrounding HyperCLOVA X; however, its performance ultimately fell short of expectations. The investor noted that HyperCLOVA X struggled to differentiate itself from well-established competitors such as ChatGPT and Google’s Bard, leaving investors wanting more, especially given Naver’s substantial investment in AI development.
Lack of a clear profit model
Apart from technical glitches and performance issues, another stumbling block for Naver’s HyperCLOVA X was the absence of a concrete profit model. Investors keenly awaited insights into how Naver planned to monetize the AI program, but the company failed to provide a compelling strategy.
Chatbots, like HyperCLOVA X, are typically offered as free services, posing a challenge to generate substantial revenue directly from the product. Also, the AI program consumes significant cooling resources, incurring operational costs without corresponding returns.
According to an analyst’s observation, the foremost concern among investors centers on gaining insight into the financial sustainability of Naver’s AI venture. The analyst pointed out that without a well-defined profit model, it becomes difficult to rationalize the substantial investments poured into this technology. To restore investor confidence, Naver is urged to address these apprehensions and provide clarity on its financial strategy.
Navigating an overcrowded market
Naver had also pledged to introduce programs aimed at helping businesses develop their AI applications. But, in a crowded market with companies like Kakao, SK Telecom, KT, and others already offering similar services, Naver faces a daunting task in distinguishing itself from the competition.
Naver Corporation’s market capitalization has taken a substantial hit following the disappointing performance of its generative AI program, HyperCLOVA X. Investors are now wary, with concerns about technical glitches, a lack of a clear profit model, and intense market competition casting shadows on the company’s AI ambitions. Naver will need to address these issues swiftly and effectively to regain its footing in the rapidly evolving AI landscape.
Source: https://www.cryptopolitan.com/naver-hyped-ai-program-fails-to-impress/