Baidu upgraded by Macquarie on AI chip and cloud potential

Investing.com -- Macquarie upgraded Baidu to Outperform from Neutral, saying investors are underestimating the value of its in-house chip-design unit and the company’s push into artificial intelligence.

The brokerage said Baidu’s Kunlun AI chips could account for nearly one-third of the company’s valuation as shipments accelerate and China seeks greater self-sufficiency in semiconductors.

The upgrade comes as Baidu pivots away from its weakening search business, which continues to face pressure from competition with short-video and social platforms.

While core advertising revenue is set to decline through late 2025, Macquarie said that weakness is already priced in and attention should shift to newer growth drivers including AI cloud services, robotaxis, and chips.

“Baidu is no longer just a search company,” the analysts said as AI adoption across Chinese enterprises is reaching an inflection point.

The brokerage sees Baidu’s cloud arm benefiting from its strong distribution and foundation models, while robotaxis continue to expand both domestically and overseas.

Though the key re-rating driver is Kunlun. Macquarie estimates the unit could generate Rmb5 billion in revenue in 2025 and double that in 2026, supported by external demand and policy tailwinds.

It applied a 20-times sales multiple, valuing Kunlun at about $28 billion, with Baidu’s stake contributing roughly $50 a share.

Macquarie lifted its sum-of-the-parts valuation for Baidu by nearly 80%, raising its price target to $176 in U.S. trading and HK$171 in Hong Kong. It lowered earnings forecasts for 2025 and 2026 to reflect search weakness, but said the company’s diversification and hidden assets give it positive option value.

Upcoming catalysts include management updates on new initiatives, signs of stabilization in search, and clearer industry benchmarks as domestic chipmakers pursue IPOs.