Baidu (BIDU) Shares Surge 11.34% on AI-Driven Strategic Pivot, Record Chip Production, and Institutional Confidence Boost

Baidu (BIDU) shares surged 11.34% in intraday trading on Tuesday, marking a five-day winning streak with a cumulative gain of 28.09%. The stock hit its highest level since September 2025, driven by renewed investor confidence in the company’s AI-driven transformation strategy. The rally reflects a broader market validation of Baidu’s strategic pivot toward artificial intelligence amid evolving regulatory and competitive dynamics in China’s tech sector.

Central to the momentum is Baidu’s strategic collaboration with China Merchants Group, a state-owned enterprise with vast operations in transportation and finance. The partnership focuses on deploying large language models, AI agents, and digital workforce solutions to enhance industrial efficiency. Analysts highlight the potential for a multi-year contract that could significantly bolster cloud revenue, reinforcing institutional trust in Baidu’s AI capabilities and long-term growth trajectory.

Parallel to these partnerships, Baidu’s self-developed AI chips have emerged as a critical differentiator. The Kunlun unit has achieved mass production of its latest chip iteration, securing contracts with major clients like China Mobile. This vertical integration reduces dependency on U.S. suppliers such as Nvidia, mitigating geopolitical risks while potentially improving margins. The shift aligns with China’s push for domestic semiconductor innovation, positioning Baidu as a key player in the country’s AI infrastructure ecosystem.

Recent product launches further underscore Baidu’s competitive edge. The Ernie X 1.1 model, unveiled at a developer conference, has demonstrated superior performance in benchmark tests compared to rivals like DeepSeek. Public approval of its Ernie Bot chatbot has also catalyzed the rollout of new AI applications, expanding user engagement and monetization avenues. These advancements validate Baidu’s R&D investments and reinforce its position in the crowded AI market.

Analyst sentiment has shifted decisively toward optimism. Arete Research Services upgraded Baidu’s ADRs to “buy” from “sell,” reversing its stance after months of bearish outlooks. Goldman Sachs and Citigroup have similarly emphasized growth in cloud services and AI adoption, amplifying investor sentiment. Institutional activity, including a 371.4% increase in holdings by Nomura Holdings, further signals confidence in Baidu’s strategic direction.

While Baidu’s core advertising business continues to face headwinds, its AI initiatives are increasingly viewed as a counterbalance. Analysts note that chip development and cloud computing could generate sustainable revenue streams, reducing reliance on volatile ad income. This diversification strategy aligns with broader industry trends, as China’s digital ad market contends with regulatory scrutiny and economic challenges.

Options trading activity has surged, with 170,000 contracts traded in a single session—triple the 20-day average—highlighting speculative interest in Baidu’s stock. The heightened derivatives activity underscores the market’s appetite for leveraging the company’s AI-driven narrative, though it also reflects the stock’s inherent volatility during this transformational phase.