Baidu ranks as China’s cheapest Internet stock amid AI concerns

[HONG KONG] Sharp stock underperformance for Baidu on concerns over its outlook have left it trading at the cheapest valuation among China’s major Internet firms.

Baidu has suffered from investor concerns over its competitiveness in artificial intelligence (AI) development as well as the high costs it is incurring in an effort to catch up. Its shares slumped as much as 3 per cent in Hong Kong on Thursday (Aug 21) after the company posted its worst quarterly revenue drop in over three years.

With the decline, the stock is trading at around 9.7 times estimated forward earnings, ranking lowest of any profitable company on the Hang Seng Tech Index. It’s even cheaper than troubled property developer Longfor Group Holdings, which trades at 11 times.

“The company’s search arm, once a dominant cash generator, now faces stiff competition from Xiaohongshu and Douyin,” said Eric Shen, an analyst at global research firm Third Bridge. “These rivals have built content ecosystems that feel livelier and stickier, drawing users away from Baidu’s more static, web-based offerings.”

Baidu’s shares are up a scant 3 per cent on the year, trailing the AI-fuelled 24 per cent rise in Hong Kong’s tech stock benchmark. Analysts say the company’s stepped-up investment in robotaxis and additional AI offerings in its search business are among factors that could help drive a rebound. BLOOMBERG