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While ChatGPT and U.S. tech heavyweights such as Nvidia (NVDA), Microsoft (MSFT), and Meta Platforms (META) have dominated the artificial intelligence (AI) conversation, a sleeping giant in China has been quietly building its AI empire. Baidu (BIDU), often called the “Google of China,” is positioning itself as a major player in the artificial intelligence revolution. With its ERNIE Bot already serving over 230 million users and its autonomous driving platform Apollo making significant strides, Baidu’s transformation from a search engine company to an AI powerhouse continues to gain momentum.
As we begin 2025, Baidu looks uniquely positioned to capitalize on a rapidly expanding addressable market. So, let’s see if you should invest in the AI stock right now.
Baidu Is Poised for Explosive Growth
In an employee letter marking Baidu’s 25th anniversary, company CEO Robin Li stated he envisions “explosive growth” in AI applications for 2025. According to a TipRanks article, the Chinese tech giant is showing promising signs, with its AI-powered platform Baidu Wenku attracting over 40 million paying users and 70 million monthly active users.
Moreover, website traffic on this platform surged 272.4% year-over-year in 2024, validating its AI-focused strategy. Notably, Baidu invests over 20% of its revenue in R&D to maintain a technological edge over its peers.
While Baidu’s AI ambitions are exciting, let’s dive into the numbers to see if they support the “explosive growth” narrative.
A Strong Performance in Q3 2024
In the third quarter, Baidu Core (its main business segment) reported sales of $3.78 billion, which stayed relatively flat year-over-year. Moreover, AI Cloud revenue touched $686 million, up 11% compared to the year-ago period. AI-related sales now account for 11% of total cloud sales, up from 9% in Q2.
Baidu claimed that the ERNIE platform currently handles 1.5 billion API calls daily, up from 600 million in August. It also stated that over 20% of search results contain AI-generated content, and 70% of the Baidu App’s monthly users engage with generative AI content.
Baidu's AI transformation is showing promising signs. For instance, its document platform, Wenku, saw subscription revenue grow 23% year-over-year, and AI-enabled features reached 50 million monthly active users — a 300% jump. More impressive is that about 20,000 advertisers generate daily ad spending through ERNIE agents.
Alternatively, online marketing revenue declined 4% year-over-year to $2.89 billion, reflecting China's challenging macroeconomic environment. Its core business still represents the majority of sales, so any continued weakness could offset AI-powered gains.
Baidu’s financials paint a picture of a company investing heavily in AI while maintaining profitability. It reported operating income of $844 million, indicating a margin of 25%. With a free cash flow of $376 million, Baidu ended Q3 with a cash position of over $20 billion.
What is the Target Price for the AI Stock?
Analysts tracking Baidu stock expect its sales to rise from $18 billion in 2024 to $20.5 billion in 2026. Moreover, adjusted earnings are forecast to expand from $10 per share in 2024 to $11.3 per share in 2026. So, priced at just 7x forward earnings, BIDU is an AI stock trading at a cheap multiple.
Valued at a market cap of $29.2 billion, Baidu has delivered outsized gains to long-term shareholders. The AI stock went public in 2005 and has since returned close to 600%. However, it also trades 75% below all-time highs, allowing you to buy the dip.
Out of the 17 analysts covering BIDU stock, 10 recommend “Strong Buy” and seven recommend “Hold.” The average target price for Baidu stock is $113.28, indicating upside potential of over 30% from current levels.
