AI Reshapes Baidu's Long-term Narrative

Source: Hard AI

Author: Zhang Yaqi

Huatai Securities Research believes that as one of the few domestic internet companies that integrates self-developed chips, AI infrastructure services, and AI application scenarios, there are several significantly undervalued business assets within the Baidu system.

With the continuous iteration of AI large model capabilities and the ongoing penetration of AI applications, Baidu's autonomous driving business, Kunlun chip business, Baidu Wenku, and Baidu Cloud, which have AI functionalities, are expected to be repriced as their scale continues to expand. The Huatai Securities Xia Lulou research team adjusted the SOTP valuation composition for the stock in a report released on the 14th, raising its target price for US stocks to $243.1 and for Hong Kong stocks to HKD 236.0, maintaining a "Buy" rating. As of the time of publication, Baidu's Hong Kong stock price was HKD 131 per share, indicating about an 80% upside potential compared to the target price.

The advertising commission revenue brought by Agents and digital humans has reached 16% of Baidu's core advertising revenue in Q2 2025, approximately 2.6 billion yuan, and has shown a strong momentum with a month-on-month growth of over 50%. Baidu's "Luo Bo Kuai Pao" has achieved positive UE performance in the Wuhan area due to its technological and cost advantages, and is continuously opening up overseas market opportunities.

Huatai Securities believes that Baidu's full-stack capabilities in the AI field are gradually showing their value. In April 2025, Baidu announced the activation of its fully self-developed 30,000-card Kunlun chip P800 cluster, which can simultaneously carry out full training for multiple large models with hundreds of billions of parameters. The number of paid users for Baidu Wenku's AI features has exceeded 40 million, with monthly active users reaching 97 million, demonstrating the enormous potential of AI-enabled tool applications.

Rapid Growth of AI Advertising Monetization Model

Baidu's core advertising business is undergoing a profound AI transformation. The report points out that Baidu is advancing from two dimensions:

1. Transforming Traditional Search: Improving user experience by generating higher quality multimodal content through AI. As of July 2025, AI-generated content accounted for 64% of mobile search results pages. Although this initiative has put pressure on short-term advertising revenue, it has resulted in increased user stickiness, with Baidu APP's monthly active users (MAU) reaching 735 million in June 2025, a year-on-year growth of 5%.
2. Exploring New AI Advertising: Actively deploying new advertising forms represented by Agents (intelligent agents) and digital humans. This model has shown strong commercialization potential, with advertising commission revenue reaching 16% of Baidu's core advertising revenue in Q2 2025, corresponding to approximately 2.6 billion yuan, and a month-on-month growth of over 50%. According to data from Baidu's official account, after adopting deep conversion targets, the effective rate of merchant leads improved by an average of 22%, and the cost of in-store visits decreased by 64%

Accelerating Autonomous Driving Overseas, Cost Advantages Open Up Space

Baidu's Apollo Go has achieved significant results overseas thanks to its solid technological foundation and clear cost advantages. As of June 2025, Baidu's Apollo Go has expanded its global business coverage to 16 cities. The company has formed strategic partnerships with Uber and Lyft, planning to integrate thousands of autonomous vehicles into the global mobility network.

Huatai Research emphasized Baidu's cost advantages in its report. The cost of Baidu's sixth-generation vehicles has decreased by 60% compared to the fifth generation, priced at approximately 200,000 RMB, significantly lower than Waymo's fifth-generation vehicle cost of about 175,000 USD. In terms of order volume, in Q2 2025, Baidu's Apollo Go provided over 2.2 million fully autonomous rides, a year-on-year increase of 148%, approaching Waymo's peak of 250,000 orders.

Baidu has deployed over 1,000 fully autonomous vehicles, nearing Waymo's fleet size of 1,500 vehicles. Considering the relatively higher labor costs in overseas markets, Baidu's autonomous driving business is expected to further amplify its cost advantages in these markets, laying the foundation for long-term profitability.

AI+SaaS: Tool-based Applications Have a Large User Base, Payment Potential Yet to Be Released

The report highlights that several tool-based applications under Baidu, which have integrated AI features, such as Baidu Wenku and Baidu Cloud, have already accumulated a large user base and demonstrated strong payment conversion potential.

• Baidu Wenku: As of April 2025, the monthly active users reached 97 million, with the number of paying users for its AI features exceeding 40 million, second only to Microsoft's Copilot globally.
• Baidu Cloud: According to 36Kr's AI product rankings, its MAU reached 154 million in August 2025. The revenue growth rate driven by AI features reached 120%.

Huatai Research believes that compared to other leading AI tool software companies in China, Baidu has performed well in user accumulation and payment conversion, and it is expected that with the continuous iteration of AI features, the revenue from this segment is likely to grow further.

Kunlun Chip Technology Accumulation Gradually Emerges

Self-developed chip capabilities will become a differentiating advantage for Baidu compared to other cloud service providers. According to IDC data, in 2024, Baidu ranked third in the shipment volume of data center chips in China with 69,000 units, behind Nvidia and Ascend, and ahead of Cambricon's 26,000 units. **

In April 2025, Baidu founder Robin Li announced the activation of the fully self-developed 30,000-card Kunlun Chip P800 cluster, which can simultaneously support multiple full-version Deepseek and other hundred billion parameter large models for full training, and can also support 1,000 customers simultaneously tuning hundred billion parameter large models. In August 2025, Kunlun Chip won a billion-level order in the China Mobile centralized procurement project