Baidu (BIDU), once seen as a sluggish e-commerce giant capable of dominating online search, is spreading its wings as an AI butterfly. Shares jumped 25% this week as investors rewarded Chinese tech stocks following the easing of U.S.–China tensions and renewed optimism surrounding AI. Furthermore, several ratings upgrades have helped investors see the Chinese online revenue generator in an entirely new light.
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According to several sources, BIDU is targeting an entry into AI-focused microchips and using proprietary infrastructure to power its flagship large language model (LLM) called Ernie Bot. Two analysts in particular, Thomas Chong from Jefferies and Shawn Yang from Arete Research, helped fan BIDU’s bullish flames.
Chong reiterated his buy rating and raised his firm’s price target on Baidu from $108 to $157. Meanwhile, Shawn Yang announced a complete U-turn by upgrading Baidu from Sell to Buy with a $143 price target. According to both analysts, BIDU’s burgeoning chip venture could eclipse the adverse effects from BIDU’s online advertising business, thereby creating a meaningful new growth engine for the company. In other words, online ads are what BIDU is moving away from, and leaning towards what seems like the all-pervasive theme in the market right now: artificial intelligence (AI).
Baidu’s Q2 results and recent investments show its AI metamorphosis is well underway, setting the stage for robust earnings growth in the coming years. Even after climbing over 60% year-to-date, the stock trades at just 16x forward earnings—leaving valuation within the strike zone of opportunistic growth investors. For these reasons, I remain Bullish on Baidu.
Baidu’s AI Growth is Powered by Two Engines
My bullish outlook on Baidu is reinforced by two powerful AI-driven growth engines.
First, Baidu AI Cloud has become the backbone of the company’s AI strategy, driving both revenue and adoption. In Q2, non-online marketing revenue surged 34% year-over-year, with management crediting much of the momentum to AI Cloud. China’s public cloud market—the world’s second largest after the U.S.—is projected to expand at a ~15% CAGR through 2030, according to Grand View Research.
Within this, the AI-as-a-Service segment, where Baidu is a leader, is expected to grow even faster as the Chinese government prioritizes mission-critical AI investment. With Baidu ranked as China’s top cloud provider for six consecutive years, the company looks well-positioned to capture this wave of growth.
Second, Apollo Go, Baidu’s autonomous ride-hailing platform, is scaling rapidly and generating a new revenue stream. The service completed 2.2 million fully autonomous rides in Q2, a 148% increase from the prior year, bringing its lifetime total to over 14 million rides.
Its footprint is also expanding rapidly: Apollo Go now operates in 16 Chinese cities and has begun testing in Dubai and Abu Dhabi, marking its first steps into the international market. Strategic partnerships with Uber Technologies (UBER) and Lyft (LYFT) further strengthen its global ambitions, unlocking access to the Middle East via Uber and to Europe (Germany and the UK) via Lyft.
Together, Baidu AI Cloud and Apollo Go highlight Baidu’s transformation from a legacy search engine into an AI-first company with multiple scalable growth drivers.
Baidu is Using AI to Future-Proof its Legacy Business
Beyond its new growth engines, Baidu has also made significant progress in embedding AI into its legacy search business—another reason I remain bullish on its outlook. By July 2025, 64% of Baidu’s mobile search results featured AI-generated content, nearly doubling from 35% just a year earlier. This mirrors Google’s strategy of weaving AI responses directly into search, with Baidu’s own Ernie 4.5 LLM powering the shift. The goal is clear: keep users within Baidu’s ecosystem rather than losing them to standalone AI chatbots, ensuring its 735 million active users remain monetizable well into the future.
Industry data supports this approach. A July survey from Innovating With AI found that 83% of users who tried AI-powered search considered it more efficient and time-saving than traditional engines. Failure to act could have opened the door for rivals to erode Baidu’s market share.
Instead, the opposite has happened—StatCounter data shows Baidu’s share of the Chinese search market rising from ~46% in May to 60% by July. In my view, Baidu is effectively future-proofing its search franchise, which continues to generate the bulk of its net income, while positioning itself to capture additional upside from AI adoption.
Is Baidu a Good Stock to Buy Now?
Wall Street analysts are pretty evenly split between bullish and neutral. BIDU stock carries a Moderate Buy consensus rating based on seven Buy, five Hold, and two Sell ratings over the past three months. BIDU’s average stock price target of $110.10 implies approximately 18% downside potential over the next twelve months.
Although Baidu seems expensively valued based on analyst ratings, I believe Baidu’s earnings growth will accelerate in the next couple of years, resulting in a valuation re-rating in the market and lucrative gains for long-term investors.
My conviction is supported by several factors, including Baidu’s strong position to achieve higher ad efficiencies through AI integration into its search business, Apollo Go’s global expansion, and AI Cloud’s significantly faster revenue growth compared to the legacy business. Furthermore, I believe government support will boost investor sentiment. The Chinese government has already introduced two distinct national strategies to support the tech sector: Made in China 2025 and the Next Generation Artificial Intelligence Development Plan.
Baidu’s AI-Powered Next Chapter is Just Beginning
Despite substantial gains this year, Baidu still looks attractively valued as it future-proofs its core business with AI, benefits from renewed government support for China’s tech sector, and begins to scale new revenue streams. I remain bullish, as Baidu’s next growth phase—driven by AI—appears to be in its early innings, leaving significant runway for long-term earnings expansion.