Baidu’s (BIDU) AI Chip Spinoff Seen as Catalyst for Shareholder Value

Core Viewpoint - Baidu, Inc. is recognized as a significant player in the AI sector, with analysts optimistic about its future due to its AI ecosystem and monetization opportunities [1][6]. Group 1: Analyst Insights - US Tiger Securities analyst Bo Pei raised Baidu's price target to $150.00 from $135.00 while maintaining a "Buy" rating, highlighting the company's potential in AI [1]. - The firm believes Baidu will unlock shareholder value through the upcoming listing of its AI chip subsidiary, Kunlunxin, and sees Baidu Cloud benefiting from the rapid adoption of AI in China [2][3]. - Baidu has filed a confidential IPO application for Kunlunxin in Hong Kong, intending to retain majority control post-IPO [4]. Group 2: Financial Projections - Revenue estimates for Baidu's fourth quarter remain unchanged, but non-GAAP EBIT and EBITDA have been slightly reduced due to refined assumptions around depreciation and stock-based compensation [3]. - A valuation of RMB 100 billion is assigned to Kunlunxin, suggesting a conservative multiple of 15.4x EV/sales based on projected 2026 revenue, compared to peers like Cambricon Technologies at approximately 31.5x EV/sales [5]. Group 3: Strategic Developments - The spin-off of Kunlunxin is viewed as a strategic move to unlock hidden value and provide independent capital access for AI chip development [5]. - Despite caution regarding Baidu's near-term revenue and earnings growth, the long-term potential tied to AI is seen as a significant catalyst for the stock, particularly in the robotaxi and AI cloud sectors [6].