Baidu (BIDU): The AI-Driven Titan in Burry's Portfolio with Massive Upside

The investing world has long watched Michael Burry’s moves with a mix of curiosity and reverence. Known for his contrarian bets and knack for identifying undervalued assets, Burry’s Scion Asset Management has maintained a significant stake in Baidu, Inc. (BIDU) for over a decade. As of late 2024, Baidu remained one of Burry’s top holdings, accounting for 13.61% of Scion’s portfolio, a position he has steadfastly held despite market volatility. But with Baidu’s stock price down over 40% from its 2021 highs, investors are asking: Is this AI pioneer’s best days behind it—or is it primed for a resurgence?

Why Baidu Still Holds Burry’s Attention

Burry’s portfolio strategy is clear: long-term bets on companies with defensible moats and secular tailwinds. Baidu fits this mold in two critical ways. First, it is a leader in China’s AI revolution, with its Apollo platform dominating autonomous driving and its Kunlun chips powering data centers. Second, Baidu’s Baidu Cloud business has grown at a blistering 30% CAGR over five years, now serving as the backbone for industries from finance to healthcare.

But the key catalyst for Baidu’s upside potential lies in its AIaaS (AI as a Service) platform, which already accounts for 35% of its revenue. As enterprises globally race to integrate AI into their workflows, Baidu’s ability to offer scalable solutions—from natural language processing to predictive analytics—positions it to capitalize on a market expected to hit $287 billion by 2030, per IDC estimates.

The Numbers Behind the Narrative

While Baidu’s stock has underperformed the broader market in recent years, its fundamentals are quietly strengthening. In Q4 2024, Baidu reported a 22% year-over-year jump in AI Cloud revenue, driven by demand from financial institutions and manufacturing firms. Meanwhile, its core search business remains resilient, contributing steady cash flows that fund its high-growth initiatives.

Burry’s decision to hold Baidu despite its valuation decline also hints at his confidence in its balance sheet: Baidu holds $12.6 billion in cash and equivalents, with net debt under 1x EBITDA—a rare combination of financial flexibility and profitability in today’s tech landscape.

The Risks, and Why They’re Overblown

Critics argue that Baidu faces headwinds from regulatory scrutiny in China, slowing ad revenue, and competition from rivals like Alibaba and Tencent. However, these risks are already priced into the stock. Baidu’s P/E ratio of just 15x forward earnings suggests the market has largely discounted these challenges, leaving room for upside if execution improves.

Moreover, the company’s autonomous driving division, Apollo, is nearing commercial viability. With partnerships secured with automakers like Geely and Volvo, Apollo’s driverless taxis could generate a $10 billion annual revenue stream by 2030, according to Bernstein Research.

What’s Next for Baidu and Burry?

While Scion’s Q1 2025 portfolio remains unpublished (as of the latest data), Burry’s track record suggests he’s not one to sell winners prematurely. Baidu’s AI-driven revenue streams, fortress balance sheet, and strategic focus align perfectly with his investment philosophy.

If Baidu can deliver on its AIaaS and autonomous driving promises, a 50-70% upside from current prices is plausible, especially if its valuation multiples expand to match peers like NVIDIA or Alphabet. Even a modest re-rating to 20x forward earnings would push the stock to $200+, a level not seen since late 2021.

Conclusion

Baidu isn’t a flash-in-the-pan tech stock. It’s a strategic asset in a portfolio designed to weather market cycles—a fact underscored by Burry’s unwavering support. With $1 billion+ in annual R&D investment, a dominant AI ecosystem in China, and a balance sheet that rivals its peers, Baidu is positioned to thrive in the AI-driven economy.

While uncertainty lingers around Scion’s Q1 2025 holdings, the data is clear: Baidu’s fundamentals are improving, its AI ambitions are on track, and its valuation offers a margin of safety. For long-term investors, this could be one of Burry’s most compelling calls yet.

This analysis is based on publicly available data as of Q4 2024. Future performance cannot be guaranteed.