- Baidu’s AI chip unit Kunlunxin confidentially filed for a Hong Kong IPO as a planned spin-off while remaining a Baidu subsidiary.
- Jefferies values Kunlunxin at US$16–23B, implying US$9–13B of attributable value to Baidu from its ~59% stake.
- Baidu shares jumped about 10–12%, and Jefferies raised its Baidu price target to US$181 from US$159.
- Key risks include listing approval and timing, IPO terms/valuation, and Kunlunxin’s ability to scale competitively amid geopolitical constraints.
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The decision by Baidu to spin off its AI chip arm, Kunlunxin, via a Hong Kong IPO represents a strategic effort to crystallize value within its hardware business and capitalize on strong investor enthusiasm for domestic semiconductor innovation in China. Founded in 2012 as Baidu’s internal chip unit, Kunlunxin has grown in external-facing operations, exceeding RMB 3.5 billion (≈US$500 million+) in revenue during 2025, with projected profitability.
Jefferies’ valuation of Kunlunxin at US$16–23 billion reflects a significant premium over its last funding-round valuation of ~RMB 21 billion (US$2.9–3 billion). The attribution of US$9–13 billion back to Baidu—based on ~59% ownership—creates an expectation of unlocking latent value. This valuation bump underpins Jefferies’ bullish outlook, triggering a revised price target for Baidu shares to US$181, up from US$159.
Yet multiple uncertainties remain. The IPO filing is confidential and subject to regulatory approval; details about the size of the offering, share class, free float, and whether first-day valuations will reflect Jefferies’ estimate are unanswered.
Competitive positioning is also material. While Kunlunxin has seen sales expand with state-backed data center projects and China Mobile participation, its technology (e.g. chip performance, manufacturing process) is still behind the world’s most advanced AI chips, especially those from Nvidia, limiting its ability to directly displace leading imports.
Considering macro-geopolitical context: China’s domestic chip self-reliance programs offer strong policy tailwinds. U.S. export restrictions on advanced chips and intensifying technology rivalry make a spin-out attractive both financially and politically. However, regulatory, investor, and operational risk are magnified in this environment.
Strategically, if successful, the IPO could allow Baidu to: (i) raise additional capital for Kunlunxin directly; (ii) improve operating transparency and performance accountability; (iii) refine investor perceptions by separating high-growth AI chip business from legacy search/ad revenue drag. However, any delay or weaker offering could dampen sentiment. The move also re-frames Baidu’s competitive landscape vs. domestic peers such as Huawei (Ascend), Cambricon, Biren Technology, and others seeking scale in AI semiconductor design.
Key metrics to watch going forward include IPO timeline (expected filing in Q1 2026, listing possibly early 2027), revenue growth trajectory, competitive performance of upcoming chips (e.g., those beyond P800), costs and yield of manufacturing, margin expansion, and clarity on how Baidu allocates capital between businesses.
Supporting Notes
- Baidu’s Kunlunxin filed a confidential listing application to the Hong Kong Stock Exchange on January 1, 2026.
- Kunlunxin’s most recent funding round raised over RMB 2 billion, valuing it at ~RMB 21 billion (~US$3 billion).
- The division expects revenue in 2025 to exceed RMB 3.5 billion, with over half coming from external (non-Baidu) customers.
- Jefferies estimates Kunlunxin’s standalone value between US$16–23 billion; Baidu owns ~59%, implying US$9–13 billion of owner value.
- Jefferies raised Baidu’s price target to US$181 (from US$159), maintaining a Buy rating, suggesting ~39% upside.
- Baidu’s stock rose ~10–12% in U.S./Hong Kong markets after announcement of IPO plans.
- Key challenges: registering the IPO, regulatory approvals, timing, and ability to scale products vs competitors.