Baidu Shares Surge 16% on AI Expansion and Strategic Partnerships

Baidu Shares Surge 16% on AI Expansion and Strategic Partnerships

Baidu, the dominant Chinese search engine operator, saw its Hong Kong-listed shares rise nearly 16% on Wednesday, reaching two-year highs amid growing investor optimism over its artificial intelligence (AI) business. The company’s American depositary receipts (ADRs) also gained close to 8% in U.S. trading overnight.

This surge follows a ratings upgrade by Arete Research Services, which raised Baidu’s ADR rating from sell to buy. The upgrade was driven by a positive outlook on Baidu’s AI chip and cloud computing revenue streams, signaling confidence in the company’s strategic pivot toward AI technologies.

Strategic Focus on AI Chips and Cloud Computing

Baidu has aggressively expanded its AI-related operations, particularly in developing proprietary AI chips that power its large language model and AI chatbot, Ernie Bot. According to a recent report by The Information, Baidu has begun utilizing internally designed chips to train its AI models. This move not only supports the company’s AI ambitions but also reduces reliance on Nvidia chips, which face export controls imposed by the U.S. government.

Arete Research analysts suggest that Baidu’s growing chip business could substantially offset revenue pressures from its struggling online advertising segment. Despite a reported decline in second-quarter revenue last month, largely due to advertising headwinds, Baidu’s Hong Kong shares have appreciated nearly 59% year-to-date.

New Partnership and Capital Raises to Fuel AI Growth

Earlier this week, Baidu announced a strategic AI partnership with China Merchants Group, a major state-owned enterprise with interests spanning transportation, finance, and property development. The collaboration aims to develop applications involving large language models, AI agents, and digital employees to advance industrial intelligence based on practical business scenarios.

To support its AI initiatives, Baidu disclosed a 4.4 billion yuan ($56.2 million) offshore bond offering on Tuesday, following a $2 billion bond issuance in March. This fundraising approach aligns with broader industry trends, as other Chinese tech giants like Tencent have also raised capital through debt to finance their AI investments.

Ongoing AI Innovation

At a recent developer conference, Baidu unveiled Ernie X 1.1, its latest reasoning model. The company claims that benchmark tests demonstrate superior performance compared to peer Chinese AI start-up DeepSeek’s latest model, although this claim has not been independently verified by CNBC.

Industry analysts, including Gimme Credit Senior Bond Analyst Saurav Sen, have noted that Baidu’s capital allocation patterns indicate a decisive “all-in AI pivot,” underscoring the company’s commitment to becoming a leading AI player in China’s competitive technology landscape.