BAIDF - Baidu: GenAI May Take Years To Drive Overall Revenue Growth

2024-07-15 06:07:14 ET

Summary

• Last week, Baidu's stock bounced back 10%, driven largely by news of regulatory approval for robotaxis in Beijing, highlighting the company's future growth potential in AI.
• Investors have stayed on the sidelines regarding extremely cheap valuation due to macro risks, including slow economic recovery and geopolitical tensions.
• Baidu's non-online marketing segment, which constitutes a small portion of the company's total revenue, grew only 6% YoY last quarter, driven primarily by its AI Cloud business.
• The shift towards becoming a GenAI company from its traditional business presents a substantial growth opportunity, but the monetization of AI technologies may take multiple years.
• President Xi's emphasis on developing AI technology for military use suggests that stocks focused on GenAI, such as BIDU, may outperform if geopolitical conflicts materialize.

A Leading AI Company in China

Baidu's ( BIDU ) stock had been under pressure, down almost 25% YTD, before experiencing a 10% bounce back last week. Despite a nearly historical low valuation, all Chinese tech stocks have remained on the sidelines in the low growth post-pandemic regime, largely due to systemic risks triggered by slower-than-expected consumption recovery , persistent price drops in the housing market, and geopolitical tensions ( export restrictions on AI chips ). Meanwhile, a strong dollar has also been pressuring the Asian stock market....

For further details see: