Baidu Sets Hong Kong IPO for AI Chip Unit Kunlunxin
The move, which could raise up to $2 billion, aims to unlock value from Baidu's semiconductor division and aligns with China's tech self-sufficiency push.
Chinese technology giant Baidu is pushing forward with a plan to list its AI chip design unit, Kunlunxin, on the Hong Kong Stock Exchange, a strategic move aimed at unlocking the division's standalone value and raising capital to fuel its growth. The company has confidentially filed for the initial public offering, which Bloomberg reports could raise as much as $2 billion.
The spin-off has been met with enthusiasm from Wall Street, with multiple analysts upgrading their outlook on Baidu. However, the company's American depositary receipts faced headwinds in recent trading. On Tuesday, Baidu's Nasdaq-listed shares fell 2.18% to close at $146.42, giving back some recent gains despite the positive news.
Unlocking Value and Fueling Growth
The decision to pursue a separate listing for Kunlunxin is central to Baidu's strategy to monetize its heavy investments in artificial intelligence. By establishing Kunlunxin as an independently funded entity, Baidu can attract investors specifically focused on the high-growth semiconductor industry and provide the unit with the capital needed for its intensive research and development efforts.
Analysts see significant upside potential. While Kunlunxin was valued at approximately $3 billion in a previous funding round, Jefferies analysts have suggested its valuation in an IPO could soar to between $16 billion and $23 billion. This reflects the immense strategic value placed on domestic AI chip technology within China. The move has prompted a wave of positive revisions from investment banks, with HSBC, JPMorgan, and Citi all raising their price targets for Baidu, signaling confidence that the spin-off will be a major value catalyst for the parent company.
A Pillar of China's Tech Ambitions
Kunlunxin, which produces processors designed to handle complex AI tasks, is a key component of China's national drive for technological self-reliance. Amid ongoing US-China trade tensions and American restrictions on the export of advanced semiconductors, Beijing has prioritized the development of a domestic chip industry. Kunlunxin's chips are seen as a homegrown alternative to processors from leading global firms like Nvidia.
According to a filing with the Hong Kong exchange, the IPO will help Kunlunxin expand its business beyond Baidu's internal needs to serve third-party clients in areas like cloud computing, finance, and autonomous driving. Baidu will remain the parent company and a primary customer following the listing.
Market Outlook
With a market capitalization of approximately $52.2 billion, Baidu has been working to re-energize its valuation, which has lagged behind other Chinese tech giants. The company has heavily promoted its AI capabilities, including its Ernie Bot generative AI model and its Apollo autonomous driving platform, with the Kunlunxin chips providing the critical underlying hardware.
Despite the recent single-day pullback in its US shares, the consensus analyst target price for Baidu's stock sits at $158.50, suggesting a potential upside from its current level. The successful listing of Kunlunxin is viewed as a critical next step, offering investors a clearer valuation of Baidu's diverse and growing portfolio of AI-powered assets.