Baidu Stock Down 17% YTD: Is It a Smart AI Buy on the Dip?

Baidu, Inc. BIDU stock has plunged 17% in the past month, below the Zacks Internet – Services industry’s 11.5% decline and the Zacks Computer and Technology sector’s decrease of 12.2%. Stocks with substantial exposure to China, including Baidu, faced considerable losses as investors reacted to the heightened tensions. Late last week, China vowed to implement a 34% retaliatory tariff on all goods imported from the U.S. starting April 10. The move came in response to Trump slapping a 34% tariff hike on Chinese goods. This move exacerbated fears of an escalating trade war, leading to significant market disruptions.Along with this, concerns related to the decline in its core online marketing revenue (it was down 7% in the fourth quarter and 3% in 2024), coupled with intense competition within China's market are making it worse despite the company’s significant strides in making strategic advancements, such as expanding its autonomous ride-hailing service to Dubai and launching new AI models ERNIE 4.5 and ERNIE X1.Baidu’s strategic move to open source the ERNIE 4.5 series and make ERNIE Bot free, while aiming to drive adoption, implicitly signals an increasingly competitive AI landscape. New entrants like DeepSeek are rapidly gaining attention, indicating that Baidu faces pressure to defend its market share through aggressive pricing strategies. While management expressed confidence in ERNIE's capabilities, the decision to open source also highlights the need to sustain relevance amid intensifying rivalry.BIDU Stock’s YTD PerformanceImage Source: Zacks Investment ResearchWhat Technical Indicators Suggest for Baidu StockBaidu shares are trading below the 50-day and 200-day moving averages, indicating a bearish trend.Image Source: Zacks Investment ResearchThat’s a significant decline, and investors are likely questioning whether the worst is over. Could this be a good opportunity to invest in this AI stock now?Let’s analyze the company’s prospects.Baidu’s AI Cloud Acceleration, Solid Customer Base & Robust AI InfrastructureBaidu’s AI Cloud revenue surged 26% year over year in the fourth quarter of 2024, contributing to a 17% full-year increase. Notably, generative AI-related revenue nearly tripled in 2024, underscoring strong enterprise demand for the ERNIE model and robust AI infrastructure. Baidu has built a diversified customer base spanning sectors like Internet services, automotive, manufacturing, energy, and finance, complemented by rapid adoption among mid-tier businesses. Enhanced by the Tianfeng MaaS platform, which offers a comprehensive suite of high-quality models and fine-tuning tools, Baidu ensures enterprise clients can seamlessly integrate AI into operations. With steady improvements in model performance and declining costs, Baidu anticipates accelerated adoption, leading to sustained revenue growth and expanding non-GAAP operating margins through 2025.Growing ERNIE Ecosystem Attracts Developers and Businesses for BIDUThe ERNIE large language model is rapidly scaling, processing approximately 1.65 billion API calls daily as of December 2024, with external API calls growing 178% quarter over quarter. Baidu’s ERNIE model showcased industry-leading capabilities in instruction following and Retrieval-Augmented Generation technology, which significantly reduces hallucinations. Strong adoption was noted across sectors such as education, e-commerce, entertainment, and recruitment.BIDU’s Apollo Go Robotaxi Business Gains ScaleBaidu’s autonomous ride-hailing service, Apollo Go, provided over 1.1 million rides in the fourth quarter of 2024, marking a 36% year-over-year increase. By January 2025, total public rides surpassed 9 million. In November 2024, Apollo Go became the first and only service authorized to conduct robotaxi testing in Hong Kong, its first entry into a right-hand drive market. Since February 2025, Apollo Go has begun fully driverless operations across China.The company is actively pursuing an asset-light expansion strategy, leveraging partnerships with local fleet operators and mobility service providers. This collaborative approach positions Apollo Go for accelerated fleet growth and higher ride volumes through 2025 while enhancing operational efficiency and paving the way for international scaling.Baidu’s Robust Financial FoundationBaidu closed 2024 with a solid net cash position of approximately RMB 170.5 billion and a free cash flow of RMB 13.1 billion. Operational efficiency is improving, evidenced by declining personnel-related expenses and stable operating expenses. Baidu continues to allocate capital prudently, prioritizing high-ROI investments across AI, cloud services, and autonomous driving. Notably, the company repurchased more than $1 billion of shares in 2024, part of its broader $5 billion buyback program through December 2025. Management has committed to accelerating buybacks, underscoring confidence in long-term prospects and dedication to shareholder value creation.A Look at BIDU Stock ValuationFrom a valuation standpoint, the company is currently trading at a discount relative to its industry and to historical metrics, with its forward 12-month price-to-sales (P/S) ratio sitting below its five-year average. It currently has a Value Score of A.Price/Sales (F12M)Image Source: Zacks Investment Research BIDU’s Upward Estimate Revisions Signal StrengthAnalysts are growing increasingly optimistic about Baidu’s earnings potential. Over the past 30 days, the Zacks Consensus Estimate for BIDU’s 2025 earnings per share has increased to $10.08 from $9.59, reflecting a positive shift in sentiment.Find the latest earnings estimates and surprises on Zacks Earnings Calendar.Image Source: Zacks Investment ResearchBaidu’s Competitive LandscapeIn cloud computing and AI, Baidu faces competition from Alibaba's BABA Alibaba Cloud and Tencent's TCEHY cloud services. Alibaba Cloud (Aliyun) is the leading cloud provider in China, offering a wide range of enterprise services. It invests heavily in AI through its DAMO Academy, focusing on NLP, computer vision, and IoT. Its strong customer base comes from Alibaba's e-commerce, logistics, and finance ecosystems. Tencent Cloud has a strong foothold in gaming, social media, and entertainment. It leverages the WeChat ecosystem for AI services like speech and image recognition and focuses its AI research on user behavior, ad optimization, and content recommendations.The Chinese AI landscape is witnessing the rise of startups like Zhipu AI, backed by major investors, including Alibaba and Tencent. Zhipu AI has been developing advanced AI models, adding to the competitive pressure in the AI sector.Baidu competes with companies like ByteDance (owner of TikTok and Douyin) and Alibaba in the digital media sector. The recent acquisition of JOYY's China live-streaming business, YY Live, for $2.1 billion, signifies Baidu's efforts to strengthen its position in the digital video market.How to Play BIDU Stock Now?Despite recent volatility and investor concerns surrounding geopolitical tensions, core revenue challenges, and heightened competition, Baidu presents a compelling long-term investment opportunity at its current valuation. The stock’s recent 17% dip—outpacing declines in its industry and sector—could be an overreaction to short-term macroeconomic pressures, presenting a potential entry point for forward-looking investors.Baidu is making strong progress in AI, cloud, and autonomous driving. Its AI Cloud revenue is surging, the ERNIE ecosystem is expanding rapidly, and Apollo Go is scaling both domestically and internationally. With solid financials, a large cash position, aggressive share buybacks, and a discounted valuation, BIDU offers a compelling growth story.Analysts remain bullish on BIDU stock, with 10 out of 19 rating it a "Strong Buy." The stock's average price target of $108.88 implies a 41.7% upside from its latest closing price. Image Source: Zacks Investment ResearchRecent upward earnings revisions further support the stock’s upside potential. For long-term investors, now may be an ideal time to buy. BIDU currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Baidu, Inc. (BIDU): Free Stock Analysis Report Tencent Holding Ltd. (TCEHY): Free Stock Analysis Report Alibaba Group Holding Limited (BABA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks