Baidu’s AI strategy ‘will bear fruit’ despite starting later than Google: Bernstein
Contributor since / Followers
V2images
Bernstein rated Baidu’s (NASDAQ:BIDU) stock as Outperform but lowered the price target to $130 from $135 as it reduced revenue and earnings estimates for the Chinese company on second-quarter headwinds and staggered search AI monetization.
The firm highlighted how Baidu’s AI search strategy and rollout compare with that of global leader Google, an Alphabet (GOOG) (GOOGL) unit.
AI Overview in search is the key new AI feature in both companies, but Google is going deep and building it out advanced functionality, whereas Baidu has less advanced features and is developing an agent plug-in chat ecosystem, analysts led by Boris Van said.
Google has rolled out the feature faster due to competitive pressures and Baidu is largely following the same timeline of testing and rolling out AI features (though with a later start), but the Chinese internet search giant has seen a different path of monetization, one that is slower and more staggered, potentially reflecting the inherently more competitive digital ad market in China, according to the analysts.
The analysts added that positive results from AI user engagement at Google in as fewer as three months after launch of AI Overview, proving the product concept is working. Google has so far reported increased searches user engagement, and user satisfaction, especially among 18 to 24-year-old users. Ad revenues have correspondingly increased on ads before and after AI Overviews.
Van and his team noted that their comparison brings reassurance that Baidu’s plans will bear fruit, over and above current almost zero expectations baked in the stock. This comparison shows that the product strategy is the right one, the concept largely works, and Baidu’s timeline is roughly in line.
For Baidu’s stock, the analysts take a more optimistic view that in spite of market pessimism on the challenges China AI faces and Baidu’s more competitive situation, the company’s AI strategies should yield some success, none of which is being priced in today.