Barclays Reassesses Baidu: Kunlun Chip Included in Valuation System for the First Time, Target Price Raised by 47%
Against the backdrop of the ongoing rise of AI narratives, Barclays’ latest research report has carried out a key valuation restructuring for Baidu.
According to Wind Chasing Trading Desk, while the assessment of Baidu’s core advertising business remains cautious, the upcoming expectation of Kunlun Chip’s spin-off IPO has driven Barclays to formally include Baidu’s AI chip business into its valuation framework for the first time, and significantly raise the target price from $100 to $147—a 47% increase—while maintaining an “Equal Weight” rating.
Barclays noted that this means Baidu’s valuation logic is shifting from the single track of “search + advertising” to a dual-track structure of “advertising base + AI hard-tech assets.”
This is not simply adding another asset, but a change in Baidu’s valuation “coordinate system”
On the surface, Barclays seems to have done just one thing: it added the asset of Kunlun Chip to the existing valuation model, and on this basis, raised the target price by 47% in one go.
But in essence, this is a switch in the valuation coordinate system.
How has the market priced Baidu in the past? For a long time, Baidu was placed in a very “narrow” framework:
Core anchor: search advertisingSecondary variables: cloud business, autonomous driving (significantly discounted)
The overall pricing method essentially treated Baidu as a mature internet company, and applied double discounts for policy uncertainty and slowing growth.
Under this system, all “future narratives” would be met with one question: “When will it fill the gap left by advertising?” As long as advertising lagged, other businesses could hardly lift valuation. What fundamental change did Barclays make this time?
Barclays acknowledged a fact for the first time:
Baidu already possesses an “AI hard-tech asset” independent of advertising, traffic, and C-end user behavior. This means Kunlun Chip is not a “business supplement” but an independent branch of the valuation method. That’s why Barclays did not raise assumptions for advertising and cloud, yet still significantly increased the target price.
In summary: Baidu is being allowed, for the first time, to discuss growth stories that don’t rely on advertising.
Why now? What is Kunlun Chip’s “value trigger”?
Many ask: Hasn’t Kunlun Chip been around for five years already? Why reassess now? Barclays’ answer is that the key is not a “technological breakthrough,” but the simultaneous maturation of three external conditions.
1. Domestic AI chips have shifted from being a “policy mandate” to “real demand”
In the past few years, domestic chips were more about policy, strategic reserves, and demonstration projects. Now the picture has changed. With the explosion of large model inference needs, computing cost as a commercial bottleneck, and continuous restrictions on HBM/high-end GPU, domestically produced inference chips that are “usable, deliverable, and scalable” have, for the first time, become rigid demand.
Barclays used the keyword “surge in demand for domestically-made chips” in its research report.
This marks a very crucial shift in how things are described.
2. Kunlun Chip’s positioning is very “practical”—not aiming to benchmark Nvidia
Barclays did not pit Kunlun Chip hard against training chips or the H100 story. Implicitly, their judgment is that Kunlun Chip’s strength lies on the inference side, forming a closed-loop in use within Baidu Cloud, search, autonomous driving, and industry applications. This means it doesn’t need to be the “world’s strongest,” merely a sustainable, deliverable link in China’s AI ecosystem.
This is the fundamental logic behind the 15x revenue multiple:
Not a disruptor’s valuation, but a high-certainty, growth-oriented hard tech valuation.
3. IPO is not for financing, but for “outsourcing pricing power”
This point is very important but often overlooked. Kunlun Chip’s IPO matters to Baidu not for fundraising or easing cash flow, but for this: shifting the question of “how much is Kunlun Chip worth?” from internal to the capital markets.
Once listed: Kunlun Chip will have independent financials, be compared horizontally with peers like Cambricon, Biren, and Suiyuan, and gain a market price that can be endlessly refreshed and revised upward. This is why Barclays modelled it ahead of IPO, rather than waiting until after listing.
Why didn’t weak advertising stop this revaluation?
This is the most confusing point for many investors.
Barclays made it clear:
Search is being eroded by AI chatbotsThere are structural downward risks in ad monetizationEven revenue and EPS forecasts were lowered
So why was the target price raised anyway? There’s only one answer: the market is beginning to accept that Baidu’s future value won’t derive only from “user attention.”
One layer deeper: This is a reordered hierarchy for “AI business models”
In the old internet era: user → traffic → advertising → cash flow
In the AI era, a new value chain is forming: compute power → model → industry solutions → infrastructure-level revenue
Kunlun Chip sits right at the upstream and hardest-to-replicate link. That’s also why the advertising business uses EBITDA multiples, while Kunlun Chip uses revenue multiples—one prices declining cash flow, the other a growth asset.
What is the real takeaway for investors from this revaluation?
If you look beyond “Baidu as a stock,” this research note is actually sending a broader signal.
1. The ‘second valuation curve’ for China concept tech is emerging
- First curve: platform, traffic, advertising
- Second curve: AI infrastructure, compute power, hard tech
Whoever can carve out the second curve independently will have a chance to break out of long-term valuation suppression.
2. The watershed for AI investing: shifting from models to “deliverable compute power”
The market is gradually waking up to:
- Models tend to converge
- Compute power and chips are the long-term bottleneck
Barclays’ stance on Kunlun Chip is essentially an early anchor for “China’s AI compute power assets.”
3. Baidu’s core risk has become much clearer
From now on, Baidu’s biggest risk is no longer only advertising decline, but whether Kunlun Chip can truly attract external customers, move beyond the “only for Baidu systems” valuation discount, and withstand peer comparison after IPO.
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The above content is from Wind Chasing Trading Desk.
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