Baidu’s AI Ambitions Fuel Investor Optimism

Baidu US0567521085

Baidu, the Chinese technology conglomerate, is making a decisive strategic pivot, channeling its resources into artificial intelligence. This shift comes as its traditional core business segments contract, while revenue from future-oriented sectors like cloud services and AI chips surges. A potential strategic stock market listing is now on the horizon, poised to unlock further value—a development that major institutional investors have already begun to capitalize on.

A significant shift in sentiment among major market players underscores the changing narrative around Baidu. On November 24, 2025, analysts at JPMorgan upgraded their rating for Baidu’s stock from "Neutral" to "Overweight," simultaneously issuing a substantial increase in their price target from $110 to $188. The bank’s rationale centered on what it views as a previously underappreciated valuation for Baidu’s AI-cloud business, which it estimates to be worth approximately $34 billion.

This reassessment is reflected in concrete investment actions. During the second quarter of 2025, the investment fund Arrowstreet Capital boosted its holdings in Baidu by nearly 29%. Collectively, institutional investors now control about 22.4% of the company’s shares. This growing attention highlights Baidu’s evolving identity from a traditional internet company to a driven player in the AI and cloud computing arena. The stock, recently trading around €108, has appreciated by more than a third since the start of the year.

A Tale of Two Business Segments

The company’s latest quarterly results, for Q3 2025, present a bifurcated performance. Baidu reported a net loss equivalent to roughly $1.6 billion, primarily driven by impairment charges. Overall revenue declined by 7% year-over-year.

However, the standout growth engine is unmistakably its AI operations. Revenue from these areas jumped 50% in the same quarter, reaching about 10 billion yuan. This robust expansion in AI services and cloud infrastructure validates the company’s strategic realignment. Market researchers at JPMorgan now project that Baidu’s cloud revenue growth will accelerate to 61% in 2026.

Chip Unit IPO to Highlight Value

Central to Baidu’s AI strategy is its semiconductor subsidiary, Kunlunxin. The company confirmed on December 7, 2025, that it is evaluating a public listing for this chip unit on the Hong Kong stock exchange. Previous reports had suggested a potential valuation near $3 billion and an IPO application in early 2026. A separate listing would clearly delineate and unlock the value of this high-growth hardware division for Baidu’s shareholders.

Demand for Baidu’s proprietary Kunlun AI chips is rising among Chinese cloud providers, telecommunications firms, and state-owned enterprises. This trend is accelerated by U.S. export controls, which have intensified the need for domestic hardware solutions. Baidu aims to solidify its technology leadership with its next-generation chips, including the Kunlun M100, anticipated for launch in early 2026.

Market participants are now awaiting the next concrete steps in the planned spin-off of the chip business, which could serve as a major catalyst for the parent company’s valuation.