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Baidu's AI bet: Investors demand proof of profit
26 Feb
Summary
- Baidu shares dropped 20% as investors seek AI profitability.
- Analysts expect revenue and profit to decline year-on-year.
- Baidu faces competition from new AI firms and rivals.
Baidu's stock has plummeted nearly 20% in the past month, signaling investor impatience for concrete returns from its substantial artificial intelligence investments. As China's Big Tech companies prepare to report earnings, concerns are mounting that Baidu's AI initiatives are not yet driving significant growth. Analysts anticipate a year-on-year decrease in both revenue and profit, largely due to the struggling core advertising business.
Despite being an early adopter of AI and launching a ChatGPT-like service, Baidu has lost ground to competitors, including newer specialized AI firms. This downturn continues despite recent efforts to reward shareholders, such as announcing its first dividend and a significant stock buyback program. The market is keenly watching for evidence that Baidu's capital spending on AI is yielding fruit, especially as investor focus intensifies on profitability and market leadership.
Bloomberg Intelligence analysts project that Baidu's AI ventures will continue to incur losses for at least the next three years, suggesting its AI prospects may be overhyped. However, some optimism exists, with JPMorgan analysts noting early signs of improving user adoption for AI functions and product integration. The options market indicates investor caution, with increased demand for downside protection ahead of earnings reports.
