Chinese Reviving Internet Giant Baidu And Its AI Ambition

Baidu (BIDU: NASDAQ), a pioneer among Chinese Internet companies, was once the country's most valuable Internet stock. After more than three years of sloppy performance, which saw it tumble to around USD 100 per share, Baidu has regained stock investors' favor – its stock rapidly surged to almost USD 300 in February 2021, a contrast to six months ago, when the price was merely USD 120. Baidu owns the biggest search engine in China; its advertising business contributes the most revenue to the company. However, the Internet climate is always changing – the once-biggest Internet giant in China is now more like an advertiser.

Dual-listing confirmed and financial climate's change

At the beginning of March, Baidu announced a 1-to-80 share split plan that is inferred as the company’s signal of its intention to go to a dual listing on the Hong Kong Exchange (HKEX). The share split may attract more investors and add more liquidity afterward. After Baidu passed the HKEX hearing, the prospectus was released. Its Internet peers Alibaba and JD.com have been listed on the Hong Kong bourse since 2020 and their IPOs have made splashes to the ‘'Asian Nasdaq' and ignited investors' passion in the eastern hemisphere.

Before now, more than a dozen US-listed Chinese companies were dual-listed on HKEX. This 'salmon run' is a consequence of many factors. Firstly, the Sino-American trade war and the tightening regulations towards foreign companies have added uncertainties to Chinese companies and shaken some investors concerning the unstable market. To mitigate risks, Shanghai and Hong Kong become the best alternatives for US-listed Chinese companies. Along with Baidu's share-split plan, there is a rumor claiming that the Internet giant gained approval from HKEX for the second listing. Investors can expect to see BAT (Baidu, Alibaba, Tencent) on the same bourse in 2021 and make their own benchmarks on Chinese Internet behemoths' performance.

Baidu: Sleeping beauty is waking up

Over the past three years, Baidu's stock performance was disappointing, dropping from mid-2018's high at USD 270 to mid-2020's low at USD 80. The stock has bounced back rapidly since the end of 2020 and ramped up to a new high of USD 354 in February 2021. Along with the surge, Baidu's autonomous driving has been attracting massive attention. Before we mention the new AI business map of Baidu, we should outline how the company has cast a ponderous shadow over the online marketing business.

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Similar to other Internet giants like Google and Facebook, the Chinese largest search engine company makes most of its revenue from online marketing business. In the company's quarter earnings conference call in March, Baidu disclosed CNY 107.1 billion revenue in 2020 and Baidu Core segment contributed CNY 78.7 billion to the total; net profit CNY 22 billion (non-GAAP). Baidu Core business includes online marketing services and products along with services from new AI business initiatives.

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