Baidu Inc (NASDAQ:BIDU) is rapidly emerging as one of China's leading artificial intelligence chip players, directly challenging Huawei Corp as both companies work to replace Nvidia Corp (NASDAQ:NVDA), whose top processors are now blocked from the Chinese market.
- BIDU is biding its time at current levels. See what is happening here.
Once known primarily as China's dominant search engine, Baidu has shifted its focus to AI and autonomous driving through its majority-owned chip subsidiary, Kunlunxin.
Baidu stock gained 38% year-to-date. Investor optimism over Baidu's shift toward AI -- particularly its fast-growing AI Cloud business and Apollo Go autonomous driving operations -- has pushed the stock higher.
Also Read: Baidu's AI Cloud Takes Off, But Ad Slump Steals Spotlight
Baidu And AI
Analysts have recently upgraded their outlook on Baidu, citing rising semiconductor momentum and growing domestic demand, CNBC reported.
Strong, sustained AI demand is giving Baidu an opening. As The Futurum Group's Nick Patience told CNBC, Baidu's chip strategy is "both a necessity and an opportunity", one that could not only solve Baidu's own supply problems but also position the company as a critical AI hardware provider for China's broader ecosystem.
Baidu unveiled a five-year roadmap for Kunlun chips, starting with the M100 in 2026 and the M300 in 2027.
According to the report, Baidu already deploys its own processors alongside Nvidia hardware to power its ERNIE AI models and sells these chips to third-party data center builders while also offering cloud compute capacity.
The business is gaining traction. Earlier in 2025, Kunlunxin secured orders from suppliers to China Mobile.
Deutsche Bank called Kunlunxin a leading domestic AI chip developer--targeting LLM training, inference, cloud, and telecom workloads.
With U.S. restrictions preventing Nvidia from selling its best GPUs to China, and Beijing discouraging purchases of Nvidia's weaker H20 chips, analysts expect Baidu to fill the gap left by Huawei's constrained supply.
JPMorgan forecasts Baidu's chip sales will surge sixfold to 8 billion yuan ($1.1 billion) by 2026, while Macquarie values the Kunlun unit at roughly $28 billion.
China's chip shortage is accelerating this shift.
Even top players such as Alibaba Group Holding Ltd (NYSE:BABA) and Tencent Holding Ltd (OTC:TCEHY) both flagged the tight supply of AI-grade semiconductors as a bottleneck for data center growth.
Baidu's AI Shift
Meanwhile, Baidu is cutting jobs across major divisions and reorganizing its AI teams to streamline operations after a loss-making quarter.
It is also shifting leadership of its ERNIE AI model and chatbot to younger managers, aiming to boost competitiveness and accelerate innovation, SCMP reported.
Recent Earnings
On November 18, Baidu reported a third-quarter revenue of 7% decline to $4.38 billion. Analysts expected $4.31 billion in revenue for the quarter.
Adjusted operating income declined 69% to $310 million.
The quarterly adjusted EPS of $1.56 topped the analyst consensus estimate of $0.91.
BIDU Price Action: Baidu shares were up 0.57% at $117.00 during premarket trading on Wednesday, according to Benzinga Pro data.
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