Baidu Is Now China’s Cheapest Internet Stock — Q2 Ads Bleed and AI’s Second Curve Fails to Inspire

TradingKey - Despite double-digit growth in its AI-related businesses, Baidu (BIDU, 9888.HK), the first Chinese internet giant to embrace AI models, is now struggling with unclear AI growth prospects. Baidu’s Hong Kong-listed shares have become the lowest-valued among Chinese internet companies.

Since the start of 2025, Baidu’s Hong Kong stock has risen less than 3%, while Alibaba and Tencent have surged 40% and 42% respectively, and the Hang Seng Tech Index has gained 24%.

According to Bloomberg, this underperformance has left Baidu trading at just 9.7 times forward P/E, the lowest among Hang Seng Tech Index constituents. Alibaba trades at 12.8x, and Tencent at 18.1x.

Baidu’s Q2 2025 earnings, released on August 20, showed:

• Total revenue down 4% YoY
• Net profit plunging 35% YoY

Driven by monetization challenges from its search business transformation, core advertising revenue fell 15% to RMB 16.2 billion, while AI-driven new businesses grew 34%, with revenue surpassing RMB 10 billion for the first time.

CEO Robin Li said that strengthened full-stack AI capabilities and comprehensive end-to-end AI products and solutions drove continued strong and healthy revenue growth in its AI cloud business. CFO described the evolving business mix as more balanced and diversified.

However, capital markets see a different picture: while the search-to-AI transition causes pain, the AI outlook remains far from promising.

Bloomberg noted that Ernie Bot, one of the earliest chatbots launched in China’s massive internet market, has since fallen behind apps from ByteDance and Tencent, as well as open-source models like Alibaba’s Qwen.

Bloomberg analysts said Baidu’s weak quarterly results confirm that significant challenges remain, and AI investments are expected to remain unprofitable for the next three years.