To The Moon

1. What is driving the recent Baidu share surge?

Baidu’s stock has rallied sharply in late 2025 and early 2026, driven principally by market reaction to its artificial intelligence (AI) strategy and corporate actions:

• The company filed a confidential listing application for its AI chip unit Kunlunxin with the Hong Kong Stock Exchange. This announcement sparked renewed investor interest as the potential spin-off could unlock value in what investors see as a high-growth segment. 

• The broader Chinese tech sector, especially AI and semiconductor names, experienced strong gains at the start of 2026 following a series of high-profile IPOs and heightened demand for domestic AI capabilities. 

• Analyst activity has been mixed but includes upgrades and increased target prices from some investment banks. 

2. Will 2026 be another year of gains for Chinese assets?

There are several considerations:

Bullish factors

• A renewed pipeline of IPOs in Hong Kong, especially in tech and AI hardware, suggests strong risk appetite among institutional and retail investors for Chinese growth stories. 

• Government policy continues to support AI and semiconductor self-sufficiency, which could benefit domestic champions in cloud computing, chips, and related technology sectors. 

• Relative undervaluation compared to global peers before the latest rally may still underpin further gains if earnings and revenue growth materialise.

Risks and counterpoints

• Macroeconomic headwinds persist: China’s property sector stresses and slower domestic consumption could moderate broader equity performance. 

• Geopolitical and regulatory tensions (particularly with the United States) may continue to create episodic volatility, especially for technology names tied to semiconductors. 

• Broader market valuations in China remain below historical peaks, indicating a cautious stance from some global investors.

Outlook

While momentum in AI, chip tech, and capital markets in Hong Kong and mainland exchanges provides a foundation for potential gains, continued performance will depend on earnings delivery, macro stability, and the global investment climate.

3. Is Baidu undervalued?

Valuation assessment is inherently forward-looking, but some points are notable:

Arguments that Baidu may be undervalued

• Baidu’s AI and cloud businesses are growing faster than legacy search advertising, and prospects for its chip segment (Kunlunxin) are reshaping its profile towards higher growth. 

• A separation of the AI chip unit may unlock a portion of value not fully reflected in the parent company’s current share price. Some analysts and reports suggest substantial implied value for the chip business, depending on IPO valuation multiples. 

• Recent analyst upgrades and raised price targets relative to prior levels imply a view that the share price had been depressed relative to fundamentals. 

Arguments that valuation may be fair or rich

• Sales and profit growth outside of the chip business has historically been slower compared to global peers. Investors may already be pricing in much of the expected growth from AI and chips.

• Market sentiment around Chinese tech can shift rapidly due to regulatory or geopolitical factors.

Valuation metrics to consider

To determine if Baidu is truly undervalued, investors typically examine:

• Price to earnings ratio (P/E) relative to its historical average

• Price to sales ratio (P/S) compared with major peers in AI and cloud

• Discounted cashflow (DCF) modelling factoring in growth from AI, cloud, autonomous driving, and chip licensing

Without recent consensus figures for these metrics readily available in this source search, a definitive valuation conclusion cannot be delivered here. Professional financial services platforms or analyst reports would provide up-to-date target valuations.

4. Summary

Chinese assets in 2026 have positive momentum driven by tech and IPO demand, but wider economic headwinds and geopolitical risk remain meaningful.

Baidu’s valuation may appear appealing if investors believe in strong growth for AI, cloud, and chip segments, but traditional valuation measures should still be checked against peer group and earnings forecasts.

If you would like, I can walk through a simple valuation model for Baidu (such as P/E comparison or DCF) based on public earnings forecasts.