Analysis of Kunlun Chip AI Chip Business Contribution to Baidu's Overall Valuation

Based on the latest data and market analysis I have collected, I provide you with a detailed analysis of the contribution of Kunlun Chip’s AI chip business to Baidu’s overall valuation:

According to the latest data, Baidu (BIDU.US) has a market capitalization of

on NASDAQ, with a current stock price of 148.70 USD and a trailing twelve months (TTM) price-to-earnings ratio of 12.56x [0]. Wall Street analysts have given a consensus target price of 160 USD, representing a 7.6% upside from the current price [0].

According to Haitong International’s research report, Kunlun Chip has a significant position in the Chinese AI chip market:

• Based on 2024 shipment volume, Kunlun Chip ranks third in the Chinese AI chip market with
  69,000 units
• Surpassing Cambricon (26,000 units) and Muxi (24,000 units) [1]

• According to Frost & Sullivan’s forecast, the size of the Chinese AI chip market will grow from
  142.5 billion RMB
  in 2025
• to
  1.3368 trillion RMB
  in 2029 at a
  53.7% CAGR
  [1]

Haitong International used two valuation scenarios for analysis [1]:

• Using 3x Muxi’s valuation (approximately 232.1 billion RMB) as the benchmark for Kunlun Chip’s valuation
• Applying a
  40% comprehensive corporate discount
• Kunlun Chip contributes 29.2 billion USD to Baidu’s market capitalization

• Not considering corporate discount factors
• Kunlun Chip contributes 48.7 billion USD to Baidu’s market capitalization

Based on Haitong International’s analysis framework, we can calculate the proportion of Kunlun Chip’s contribution to Baidu’s overall valuation:

Valuation Scenario	Kunlun Chip Contribution	Baidu’s Traditional Business Value	Estimated Total Market Cap of Baidu	Premium Over Current Market Cap
Conservative	29.2 billion USD	34.7 billion USD	63.9 billion USD	+26.7%
Optimistic	48.7 billion USD	34.7 billion USD	83.4 billion USD	+65.5%

• Conservative scenario
  : Kunlun Chip contributes
  45.7%
  of Baidu’s total valuation
• Optimistic scenario
  : Kunlun Chip contributes
  58.4%
  of Baidu’s total valuation

• Baidu currently holds
  59% of Kunlun Chip’s shares
• Expected to maintain a
  50% shareholding ratio
  after listing [1]

1. Value Unlocking
   : Through spin-off listing, Kunlun Chip’s intrinsic value can be more accurately reflected in the capital market
2. Financing Capacity
   : Independent listing will enhance Kunlun Chip’s financing capacity, supporting its AI chip R&D and production capacity expansion
3. Benchmarking Effect
   : Can ride the IPO wave of GPU suppliers (such as Muxi, Biren Technology) to gain market recognition [1]

1. High growth of AI chip market (53.7% CAGR)
2. Kunlun Chip leads in market share (ranks top three)
3. Baidu’s traditional business valuation is stable (calculated based on 2026 non-GAAP net profit of 24.3 billion RMB and 10x P/E ratio)
4. Analysts’ overall ratings are positive (74.5% recommend buying) [0]

1. Kunlun Chip has not yet been officially spun off and listed, so there is uncertainty in valuation
2. The 40% comprehensive corporate discount reflects the market’s risk premium for group holding structures
3. The AI chip market is highly competitive, requiring continuous technological innovation and market expansion

Based on the above analysis,

(based on Haitong International’s valuation scenarios). This contribution reflects the market’s high recognition of Baidu’s AI chip business and the important position of AI chips in China’s tech strategy.

If Kunlun Chip is successfully spun off and listed and obtains a reasonable market valuation, it will unlock significant shareholder value for Baidu and also enhance Baidu’s capital market recognition as a comprehensive AI tech company.

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[0] Yahoo Finance - Baidu, Inc. (BIDU) Company Overview (https://hk.finance.yahoo.com/quote/BIDU/)
[1] AASTOCKS - 《Institutional Research》 Haitong International: Baidu (BIDU.US) Is the Right Time to Spin Off Kunlun Chip for Listing (https://hk.finance.yahoo.com/news/大行-海通國際-百度-bidu-us-025635198.html)