In-depth Analysis of Baidu Kunlunxin Spin-off on Valuation and Investment Returns

I will provide you with an in-depth analysis of the spin-off of Baidu KLX (Kunlunxin) and an assessment of its impact on Baidu’s valuation and investment return prospects.

is an AI chip design subsidiary of Baidu, founded in 2011, and is a key component of Baidu’s goal to become a full-stack AI company [1]. Key highlights include:

• Strategic Position
  : Supports Baidu’s full-stack AI strategy, covering core businesses such as search engines, cloud services, and autonomous driving
• Market Performance
  : Secured an order worth RMB 1 billion from a China Mobile supply chain enterprise in 2024 [1]
• Technological Strength
  : Baidu recently launched two new Kunlun chips and a super node solution [2]

:

• Baidu has submitted a confidential application to the Hong Kong Stock Exchange (HKEX) to spin off Kunlunxin for independent listing on the HKEX Main Board [3]
• The spin-off will be conducted via a global offering, including Hong Kong public offering and institutional placement
• After the spin-off is completed, Kunlunxin will remain a subsidiary of Baidu with Baidu retaining control [3]
• The transaction still requires regulatory approval; the specific scale and structure have not yet been finalized [4]

According to Jefferies’ analysis, using the Sum of the Parts valuation method:

:

• 100% equity valuation range:
  USD 16-23 billion
  [5]
• Considers A-share and H-share discounts and the development prospects of the AI chip industry
• Baidu holds 59% equity; corresponding holding value:
  USD 9-13 billion

:

• Baidu Cloud (excluding Kunlunxin): USD 8.6 billion
• Original overall cloud business valuation (including Kunlunxin): USD11 billion
• Holding company discount:30% (remains unchanged)

:

1. Increased Transparency
   : Independent listing will improve Kunlunxin’s operational and financial transparency
2. Attraction of Professional Investors
   : Attracts investors specializing in the AI computing chip field
3. Wider Financing Channels
   : After independent listing, Kunlunxin can directly access equity and debt capital markets
4. Management Incentives
   : Strengthens management performance accountability system and improves operational efficiency [5]

Investment Bank	Rating	US Stock Target Price	Adjustment Range	Valuation Basis
HSBC	Hold	$130	+16% (up from $112)	Upper end of its own valuation range of $80-$140 [6]
Jefferies	Buy	$181	+14% (up from $159)	Kunlunxin segment valuation +30% holding company discount [5]
Market Consensus	Buy	$160	-	74.5% of analysts give a Buy rating [0]

:

• HSBC raised its target price from $112 to $130 but still maintained a “Hold” rating, and this target price is at the upper end of its own valuation range of $80-$140, reflecting a “neutral to positive but conservative” stance [6].
• Jefferies gave a more optimistic target price of $181, which is about39% higher than HSBC’s, and maintained a “Buy” rating, indicating significant divergence among institutions [2].
• From the current share price of $150.30:
  • About -13.5% downside potential from HSBC’s target price
  • About +20.5% upside potential from Jefferies’ target price
  • About +6.5% upside potential from the market consensus

:

• Market Capitalization: USD50.97 billion
• P/E Ratio:12.61x (relatively low, with room for valuation repair)
• Net Profit Margin: 20.97%
• ROE:10.43%
• Low debt risk, sound financial condition

:

• Q3 2025 EPS: $1.56, exceeding expectations by30%
• Revenue: USD4.38 billion, slightly below expectations
• Share Price Performance: Up 80.26% in the past year, up67.39% year-to-date [0]

:

• Trend
  : Uptrend (breakout day, pending confirmation)
• Buy Signal
  : Appeared on December 22
• Resistance Level
  : $151.08 (currently approaching)
• Next Target
  : $156.41
• Support Level
  : $128.09
• Warning Signal
  : KDJ (82.2/72.3/101.8) indicates overbuying; short-term correction possible

: Daily volatility 3.58%, Beta 0.43 (lower than market)

:

• The spin-off allows Kunlunxin’s value to be reflected independently, eliminating part of the holding company discount impact
• Background of rapid growth of the AI chip market in China (national semiconductor self-reliance strategy)
• Baidu holds59% equity in Kunlunxin and can still share in its growth benefits [5]

:

• Search engine business maintains stable cash flow
• Autonomous driving (robotaxi) business continues to advance, planning to enter the London market in2026 [7]
• Cloud business continues to grow

:

• The spin-off requires regulatory approval, with uncertainty
• Specific IPO scale and structure are not yet determined, which may affect actual value unlocking
• Uncertainty about Kunlunxin’s market performance after listing

:

• Jefferies’ valuation assumption of USD16-23 billion may be overly optimistic
• Need to consider A-share and H-share market discount effects
• The30% holding company discount may be difficult to fully eliminate

:

• Technical indicators show short-term overbuying, with correction pressure
• After today’s 15.03% surge, there may be short-term profit-taking pressure
• The current share price of $150.30 has exceeded HSBC’s target price of $130, with valuation divergence

:

• Sino-US tech competition may affect the development of the AI chip business
• The regulatory environment for China’s internet industry still has uncertainty

####3. Investment Return Scenario Analysis

:

• Kunlunxin successfully spins off and lists, with valuation reaching Jefferies’ upper estimate (USD23 billion)
• Baidu’s holding value reaches USD13 billion
• Share price moves toward Jefferies’ target price of $181
• Potential Return
  : Approximately +20.5%

:

• Spin-off is completed smoothly; Kunlunxin’s valuation is in the middle range (USD19.5 billion)
• Baidu’s holding value is approximately USD11 billion
• Share price approaches market consensus of $160
• Potential Return
  : Approximately +6.5%

:

• Spin-off progress is delayed or valuation falls short of expectations
• Kunlunxin’s valuation is at the lower limit (USD16 billion)
• Share price falls below HSBC’s target price of $130
• Potential Return
  : Approximately -13.5%

####1. Comprehensive Assessment

:

• Technical indicators show overbuying; there may be short-term correction pressure
• It is recommended to wait for the share price to correct to around the support level of $128-$135 before considering entry
• Key Monitoring: Spin-off approval progress, specific terms of Kunlunxin’s IPO

:

• If the spin-off is successfully executed, it is expected to unlock significant value
• Current P/E of12.61x has room for valuation repair
• Long-term prospects for the AI chip business are positive
• Target price references Jefferies’ $181, but execution risks need to be closely monitored

####2. Key Monitoring Indicators

:

• HKEX approval timeline
• IPO scale and pricing
• Kunlunxin’s market performance after listing

:

• Whether Kunlunxin’s 2025 revenue meets the expected RMB3.5 billion
• AI chip orders and customer expansion status
• Baidu Cloud business growth status

:

• Whether the share price can effectively break through the resistance level of $151.08
• Whether it can hold the support level of $128.09 during correction
• Whether the KDJ indicator returns to the normal range

####3. Investment Strategy Recommendations

:

• Can establish a small position at the current price
• Set a stop-loss level around $128
• Target price: $170-$181

:

• It is recommended to wait for correction to the $130-$135 range before entering
• Build positions in batches to reduce risk
• Target price: $160-$170

:

• It is recommended to wait for more details of the spin-off to be confirmed before making a decision
• Or consider waiting for Kunlunxin’s IPO to complete before evaluating the actual value unlocking effect

The spin-off of Baidu Kunlunxin theoretically has significant value unlocking potential; Jefferies’ estimated holding value of USD9-13 billion corresponds to18-26% of Baidu’s current market capitalization [5]. However, investors need to note:

1. Valuation Divergence
   : There is a significant difference between HSBC’s target price of $130 (Hold rating) and Jefferies’ $181 (Buy rating), reflecting different market views on the extent of value unlocking from the spin-off [5][6]
2. Execution Risk
   : The spin-off still requires regulatory approval; specific IPO terms are not yet determined, and actual value unlocking may be lower than expected
3. Short-term Technical Risk
   : The share price has risen sharply and is close to the technical resistance level, with short-term correction pressure

: The spin-off of Kunlunxin is an important catalyst for Baidu’s valuation re-rating, but investors should carefully assess execution risks, adopt a batch position-building strategy, and closely monitor the spin-off progress and Kunlunxin’s actual performance after IPO. In the long term, if the spin-off is executed smoothly and Kunlunxin’s business continues to grow, Baidu is expected to achieve valuation re-rating and move toward more optimistic analyst target prices.

[0] Jinling API Data (market data, financial analysis, technical analysis, DCF valuation)
[1] Insider Monkey - “Baidu (BIDU) Skyrockets 20% as Chip Unit Eyes IPO in HK” (https://www.insidermonkey.com/blog/baidu-bidu-skyrockets-20-as-chip-unit-eyes-ipo-in-hk-1669882/)
[2] CNBC - “Chinese tech giant will get boost from AI chip subsidiary spinoff” (https://www.cnbc.com/2026/01/02/jefferies-says-this-chinese-tech-giant-will-get-a-boost-from-its-ai-chip-subsidiary-spin-off.html)
[3] GuruFocus - “Baidu Files Hong Kong IPO for AI Chip Unit Kunlunxin” (https://www.gurufocus.com/news/4092109/baidu-files-hong-kong-ipo-for-ai-chip-unit-kunlunxin)
[4] MediaPost - “Baidu’s AI Chip Unit Files For Hong Kong IPO” (https://www.mediapost.com/publications/article/411735/baidus-ai-chip-unit-files-for-hong-kong-ipo.html)
[5] AAStocks/Yahoo Finance(香港) - “富瑞上調百度(09888)目標價14% 指分拆可釋放崑崙芯價值” (https://hk.finance.yahoo.com/news/富瑞上調百度-09888-目標價-14-指分拆可釋放崑崙芯價值-042502217.html)
[6] Investing.com(中文) - “匯豐上調百度股票目標價至130美元，看好昆侖芯分拆潛力” (https://cn.investing.com/news/analyst-ratings/article-93CH-3148952)
[7] Financial Times - “London emerges as frontline in US-China battle over robotaxis” (https://www.ft.com/content/a507f9d0-c0b2-43e3-9e2b-7ea04dbdb8d4)