HSBC Raises Baidu (BIDU) Target to $130 on Kunlunxin AI Chip Spinoff Plans

Baidu, Inc. (NASDAQ:BIDU) is one of the AI Stocks on the Market's Radar. On January 4, HSBC analyst Charlene Liu raised the price target on the stock to $130.00 (from $112.00) while maintaining a Hold rating. The rating update follows Baidu’s plans to spin off its artificial intelligence chip subsidiary, Kunlunxin, which the firm believes is value-adding for BIDU.

The firm noted how Baidu filed a confidential listing application on January 1^st, for its AI chip subsidiary KLX on the Hong Kong Stock Exchange.  A Reuters report from December 5 was also referred, which noted that KLX had received revenue of RMB2bn and made a net loss of RMB200m in 2024, aiming to generate over RMB3.5bn revenue and breakeven in 2025.

The firm assumes KLX’s 2026e revenue to reach cRMB6bn based on a similar growth rate (over 70%) in 2025, with its revenue split between direct hardware chips sales and chip-related cloud service revenue, likely to come in at 1:3 ratio as it anticipates expect to put more emphasis on stickier and higher-margin cloud revenue.

“Benchmarking respective comps for chip manufacturers and AI cloud, we value KLX’s chip revenue at 40x 2026e PS, on par with Cambricon (688256 CH, CP CNY135.55, NR), and cloud revenue at 2x 2026e PS (a discount vs our estimate for Alibaba Cloud of 2.7x — from our Alibaba SOTP cross-check — due to lower scale) or blended PS of 11x. To avoid double counting, we adjust the AI cloud valuation by removing the cloud revenue contribution from KLX. Separately, we assume Baidu’s equity stake will dilute to 51% after spinoff (from 59%). Our sensitivity analysis (exhibit 2), based on 5-15x PS, suggests KLX could be worth cUSD7-20/share to Baidu, with a base case estimate of USD15/share.”

Baidu, Inc. (NASDAQ:BIDU) is a Chinese internet giant and AI pioneer, known for its noteworthy investments in artificial intelligence technology and its position as the dominant search engine within the country.

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