Baidu's AI Initiatives Are Exciting, What About Search And The Rest?

2026-02-18 03:48:37 ET

Thesis

Baidu, Inc. ( BIDU ) is a hold in my opinion. Since 2H25, the stock has surged significantly, given the narrative of AI hardware reshoring. Domestic fabless designers like Cambricon and Moore Threads have done exceptionally well, backed by sales growth in 2024 and 2025. Baidu also has its initiative, Kunlunxin, which is in the process of an IPO, in addition to consistent traction of its Robotaxi unit, Apollo Go. Arguably, Kunlunxin has been the main driver of stock performance. I think the market is quite bullish on that, potentially valuing the unit at over $10 billion vs. the implied $3 billion (going to be great for those subscribers). That said, the current sentiment on AI is wobbly while emotionally high for China's domestic players. In addition, Baidu has a large chunk of legacy businesses that bring in more than 50% of earnings. The (structural) decline of those is, in my opinion, an overlooked fundamental driver of the business....

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