Baidu (BIDU) Gets Big Upgrade from JPMorgan: AI Chips and Cloud Now Driving the Story

Core Insights - Baidu, Inc. has been upgraded by JP Morgan to "Overweight" with a price target increase from $110.0 to $188.0, driven by optimism regarding AI and cloud as growth engines for the company [1] - Analyst Alex Yao believes the market is underestimating Baidu's transition, suggesting investors should buy the stock now to benefit from valuation rerating [2] - Baidu's cloud revenue growth is projected to accelerate to approximately 61% in 2026, up from 23% in 2025, primarily due to a six-fold increase in sales of Kunlun AI chips [2][3] Company Performance - The SOTP (Sum of the Parts) valuation framework attributes around $34 billion to Baidu's cloud business, which constitutes about 53% of the target price [3][4] - The domestic demand for AI compute in China is intense, with local hyperscalers increasingly sourcing from domestic providers, positioning Kunlun AI chips favorably for significant sales growth [3] Market Trends - GPU compute revenue is expected to maintain triple-digit growth due to enterprise demand for model training, fine-tuning, and inference, further supporting Baidu's cloud revenue growth projections [4] - The shift towards AI and cloud technologies is seen as a fundamental transformation for Baidu, justifying the dedicated SOTP valuation approach [4]