Baidu, Inc. (NASDAQ:BIDU) may have a new near-term catalyst on the horizon, with Citi opening a 30-Day Upside Catalyst Watch on the stock. On September 2, analyst Alicia Yap reiterated a Buy rating and a $166.00 price target on Baidu, Inc. (NASDAQ:BIDU), according to a press release statement.
The rating affirmation follows the firm’s 2026 China TMT Corporate Day held on September 2. Topics included in the Corporate Day included AI-powered business strategies, GPU cloud and AI cloud infrastructure revenue growth, capital expenditure trends for the second half of 2026, the Ernie development roadmap, and also dual-primary listing and Stock Connect eligibility.
The Role of Artificial Intelligence and Stock Connectivity
Citi’s note discusses management’s focus on Baidu, Inc.’s AI-powered business strategies and AI infrastructure revenue growth. For the second quarter of 2026, the company’s core AI-powered business generated RMB 12.5 billion, up 25% year-over-year and accounting for 50% of its general business revenue.
AI cloud infrastructure revenue increased 50% to RMB 7.3 billion, while GPU Cloud revenue accelerated 283% year-over-year particularly as demand for public-cloud AI computing increased.
Citi also opened a positive short term view on Baidu based on its potential Stock Connect eligibility as a possible catalyst for fund flows.
Valuation is also supportive of Baidu, with Yap noting that Baidu’s stock is trading at a 2026/2027 estimated price-to-earnings ratio of 17.1x and 13.4x, or 3.7x and 2.9x on an ex-cash basis.
Expensive AI Growth and Shrinking Advertising
While AI growth is good for a stock like Baidu, it does not come cheap. The company continues to invest in computing infrastructure, models, and even talent.
Despite the AI growth, Baidu’s second quarter revenue fell 4% year-over-year to 31.3 billion yuan. Rapid growth in artificial intelligence could not replace the decline in its advertising business.
Weak consumer spending in China and intense competition from rivals led to a drop in online marketing revenue by 19%. Meanwhile, heavy investment in AI infrastructure have been compressing short-term margins for the company.
Institutional interest in Baidu has stayed almost unchanged in 2026. 49 hedge funds held positions in the stock at the end of Q2, negligibly down from 50 in the prior quarter. Prominent investors have also been seen piling into the stock. For instance, Appaloosa Management boosted its common share position by 88% in Q2 to 1.295 million shares.
Overall, Citi’s $166 price target reflects confidence in Baidu’s AI infrastructure business. Meanwhile, the Stock Connect eligibility provides another catalyst for the stock. The key question isn’t that Baidu’s AI business is underappreciated, but whether it can become large enough to offset the weakness in its traditional advertising business.
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