Why Baidu Is the Underrated AI Stock from the East

Since our last coverage of Baidu (NASDAQ:) in August 2024, the stock price level is now slightly higher, at $89.53 from $86.96 per share. However, within that period, there have been multiple opportunities to lock in high profits. Just over a month later in early October, BIDU shares reached a $115 yearly top. This year, BIDU stock hovered two times, in February and mid-March, around $100 per share price level.

As a repeat performer, the “Google of China” is clearly worth considering for Big Tech exposure from the East, one that is still much cheaper than the likes of Microsoft (NASDAQ:) and Alphabet (NASDAQ:). The latest Baidu earnings for Q1 2025 delivered on Wednesday showcase continued growth, as the company beat revenue estimates. Although there is more than earnings to consider when it comes to Baidu, let’s first see the quarterly financial performance.

AI Cloud Boost Headed by ERNIE

At reported 32.45 RMB ($4.47B), Baidu beat FactSet’s expected revenue of 32.45 billion yuan. Year-over-year, this is 3% revenue improvement. The company’s net income to Baidu Core grew by 48% in that period to $1 billion. However, when excluding non-recurring items, as a non-GAAP measure, Baidu’s net income is $872 million, down 4% year-over-year.

Similar to Alphabet, Baidu Core consists of AI Cloud, Mobile Ecosystem and Intelligent Driving & Other Growth Initiatives (iQIYI). Ad revenue is still the company’s largest revenue source, down 6% to 16 billion yuan ($2.21B) year-over-year.

Baidu’s AI Cloud showed the largest growth, at 42% yoy. Like Google and Amazon (NASDAQ:), Baidu offers full-stack service for enterprises. Covering both front-end and back-end aspects of AI deployment, otherwise known as full-stack, Baidu designs its own Kunlun AI chips, as well as having the PaddlePaddle deep learning framework.

On top of those full-stack layers, Baidu offers ERNIE foundation large language models (LLMs). The latest iteration, ERNIE X1 Turbo, matches the performance of Chinese rival DeepSeek R1, as well as OpenAI’s o1.

According to various news reports, ERNIE 4.5 Turbo is 2x faster than its predecessor with just 20% of the cost. In turn, this model is just 0.2% – 1% of ChatGPT 4.5’s cost, having cut prices by 80% for the Turbo model in April. Suffice to say, this creates an enormous cost-efficiency advantage for China’s businesses.

As a multi-modal LLM, ERNIE is suited for a wide range of uses: image and audio analysis, document summary, image generation, textual and mathematical reasoning. Following China’s price-slashing strategy in other endeavors, from EVs to Temu’s cheap product deliveries, it is clear that Baidu aims to become the go-to place for AI app deployment.

AI as a Part of China’s Overall Strategy

As the recent investment spree in Saudi Arabia showcased, yet again, state-run capitalism is the name of the game in the form of public-private partnerships (PPPs). China’s version of state-run capitalism is arguably more efficient, lacking the veneer of political parties and the strife that comes along with racial heterogeneity.

Even the former PM and leader of the Liberal Party of Canada, Justin Trudeau, praised China for its “basic dictatorship” as it allows the nation to “turn their economy around on a dime”.

It is in this light in which Baidu should be viewed. Simply put, Baidu is one of China’s pillars (joining Alibaba (NYSE:) and Tencent) to evolve its large economic system based on manufacturing, cloud computing, automation and AI.

To this end, Baidu complements its AI efforts with autonomous driving. The robotaxi business, Apollo Go, is already ahead of competitors as it starts offering services in Abu Dhabi and Dubai, the new hub for trade, innovation, finance and logistics with near-zero taxation.

Based in Fort Myers, Florida, the Edison Awards granted Apollo Go a Gold reward in the Driverless Vehicles category for 2025. As of March 2025, Baidu reported a yearly increase of 7% for monthly active users (MAUs), at 724 million.

It is likely that Hong Kong, another financial hub, will be next in Apollo Go’s robotaxi expansion, which would secure its first mover advantage.

BIDU Price Targets

The bottom line is, investors should view Baidu as China’s tech extension. This is similar to how USG relies on Amazon, Microsoft, Meta (NASDAQ:) and Alphabet to extend its global influence for economical and geopolitical gains. And why the heads of these companies are regularly meeting with the US President, whoever that may be.

Baidu is within the Eastern version of such a Big Tech cluster. In our previous coverage of Huawei in its effort to scale up AI chip production against US export control, we concluded that US-imposed restrictions have a short time limit.

The same applies for Baidu. For value investors looking for long term gains, this means that BIDU exposure is preferable at any price dip point. According to WSJ’s forecasting data, the average BIDU price target, available as American depositary shares (ADS), is $109.66 vs the current price of $89.53 per share.

The bottom estimate is $76 while the top price target for BIDU stock is $161 per share. Overwhelming majority of analysts, 25, suggest buying at this price point. 14 analysts suggest holding while only 1 recommends selling.

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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.

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