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Headlines
- Baidu’s core business remains robust, with consistent profitability despite broader challenges.
- The company’s advancements in AI, including its ERNIE Bot and autonomous driving service, offer significant growth potential.
Baidu (NASDAQ:BIDU) has faced a challenging period recently. After its peak at $340 in 2021, the company's stock has experienced a decline, particularly over the past year, while many artificial intelligence (AI) companies like Nvidia and Palantir have seen substantial gains. Baidu's stock has dropped by 38% in the last 12 months.
Despite this downturn, Baidu’s current status presents intriguing aspects. Here are two notable reasons for optimism:
- Steady Performance in Core Business
Baidu's core operations, primarily its online marketing and cloud computing sectors, have shown resilience. Although Baidu’s growth trajectory has slowed since its earlier rapid expansion, its core business continues to be profitable. The company, once a dominant search engine in China, has faced increased competition from smartphone and social media apps, impacting its market share. Additionally, past investments in areas like food delivery and entertainment did not yield the expected returns.
However, Baidu’s core business has remained solid. In 2023, its core operations grew by 7%, with a further 4% increase in the first quarter of 2024. This segment generated 18.8 billion yuan ($2.7 billion) in operating profit, reflecting a 19% operating margin. Baidu’s app, with a user base of 676 million, remains a crucial platform for advertisers, offering significant reach in the competitive tech landscape. If Baidu continues to enhance user engagement and innovate its product offerings, it stands to benefit from its core business strengths.
- Growth Potential Through AI Innovations
Since 2023, the AI sector has garnered significant attention, and Baidu’s investments in AI technologies are noteworthy. Despite some hesitation from market participants, AI advancements could play a crucial role in Baidu’s future growth. Statista forecasts that the AI market in China will expand from $34 billion in 2024 to $155 billion by 2030, positioning Baidu to capture a significant portion of this growth.
Baidu has introduced several AI-driven services, such as the ERNIE Bot, which is similar to ChatGPT. This service has attracted 200 million users, with 200 million daily uses and 85,000 enterprises already engaged. ERNIE is beginning to contribute revenue, signaling the potential for further growth.
Additionally, Baidu’s Apollo Go, an autonomous driving service, has evolved from a research project into a fully operational service. In early 2024, Apollo Go provided 826,000 rides, marking a 25% increase from the previous year. With over 6 million cumulative rides, Apollo Go demonstrates Baidu’s capabilities in advancing autonomous driving technology. As this service continues to expand, it could redefine transportation options, offering substantial value to Baidu.
In conclusion, Baidu’s strong core business and promising AI initiatives suggest that the company is well-positioned for future growth, making it a notable entity in the evolving tech landscape.
