Baidu stock offers exposure to generative AI and self-driving vehicle technology at a low valuation multiple
Baidu (NASDAQ:BIDU), the Chinese tech firm rivaling the likes of Google and Alibaba, has struggled in recent months, its share price down more than 21% year-over-year.
However, this, combined with the company’s relatively low valuation, arguably makes the stock very reasonably priced. The stock provides exposure to innovative, booming technologies, including AI and self-driving vehicles.
Moreover, Baidu stock may be on the cusp of a major comeback, as the China-based search-engine specialist ventures boldly into technology fields with strong revenue-generation prospects.
Baidu goes all in on AI integration
Baidu appears to have no interest in merely paying lip service to the concept of AI integration. Rather, it claims to be enhancing its core products with robust gen-AI functionalities for real-world use cases.
At Wanxiang Conference 2024, Baidu showcased its various gen-AI features across its family of apps, from Baidu AI Image Assistant to content creation app Baidu Wenku. Impressively, Baidu Wenku claims to provide over 100 multimodal AI features, which have been used more than 1.5 billion times by over 140 million users.
However, Baidu’s gen-AI crown jewel is the Ernie Bot app. Comparable to OpenAI’s ChatGPT, Ernie Bot is marketed as a “24/7 online personal intelligent assistant, providing one-on-one assistance and meeting diverse needs”.
Many Americans probably have no idea how popular Ernie Bot is in China. Reuters reported that Ernie Bot “has reached 300 million users since its launch,” and Baidu claimed that its Ernie 4 iteration “rivaled OpenAI’s GPT-4 in capabilities.”
Tesla-Baidu robotaxi delayed, but not shelved
“Autonomous driving will turn into a key trade in the coming three months, aided by Tesla’s launch of its robotaxi next month,” Guotai Junan International analyst Li Muhua wrote in a note in July. As it turns out, Muhua may have spoken too soon.
To recap, regulators in Beijing, China, gave Tesla (NASDAQ:TSLA) the go-ahead in June to introduce its Full Self-Driving (FSD) driver-assistance system. Around the same time, Tesla and Baidu disclosed a collaboration to develop the mapping and navigation technology needed to power Tesla’s FSD.
According to a Bloomberg report, Beijing’s regulators then issued legislative draft guidelines that would allow “robotaxis in ride-hailing and car rental fleets”. So, for a brief time, it appeared that it was all systems go for Baidu’s grand foray into China’s nascent robotaxi market.
However, Muhua’s projections for “the coming three months” didn’t quite pan out. Sources now expect Tesla to delay its robotaxi rollout until October, and Guggenheim analyst Ron Jewsikow doesn’t anticipate a full-scale Tesla robotaxi launch until 2030 at the earliest.
So, the final Tesla-Baidu robotaxi results will be delayed but won’t be shelved completely. Besides, Baidu doesn’t entirely rely on Tesla for potential robotaxi revenue, as Baidu is testing its own Apollo Go robotaxis in China.
Baidu expects Apollo Go to turn a profit by 2025, and Muhua stated that Apollo Go is anticipated to “break even in Wuhan” this year. Hence, with or without Tesla, it’s conceivable that Baidu’s robotaxi segment could be a meaningful income source fairly soon.
Get it while it’s cheap
For North American investors, Baidu stock is a hidden gen-AI gem providing portfolio exposure to the emerging self-driving vehicle industry. Moreover, unlike some U.S.-based tech darlings, Baidu is far from overvalued. Baidu’s GAAP-measured trailing 12-month price-to-earnings (P/E) ratio is 13.44, versus the sector median P/E ratio of 18.64.
P/E ratios aren’t the be-all and end-all, but they can provide a point of departure for value-conscious stock pickers. So, as Baidu ventures boldly beyond its core search-engine business and pursues the latest and greatest in gen-AI and robotaxi technology, consider a value-packed international investment with Baidu stock.
