Cathie Wood Loads Up on Baidu—Is It the Right Time to Buy?

Key Points

• Baidu continues solidifying its position as a leading artificial intelligence company through advancements in its Ernie language models and growth in cloud services.
• The company's Apollo Go autonomous driving platform has made significant operational progress, expanding robotaxi services and achieving driverless milestones.
• Renowned tech investor Cathie Wood recently signaled renewed confidence in Baidu's innovative trajectory by making an investment following the stock price decline.

Chinese tech company Baidu, Inc. NASDAQ: BIDU is often compared to Alphabet's Google NASDAQ: GOOG due to its dominant search engine in China. However, the company's stock performance has declined about 15% over the past year, even as it aggressively advances artificial intelligence (AI) technology through its Ernie large language models, expands AI Cloud services, and develops its Apollo Go autonomous driving platform. Thus, investors are left to evaluate a potential crossroads for Baidu’s stock.

This crossroads presents investors with a challenging decision: Should they weigh the recent 20% six-month and 15% one-year declines against Cathie Wood's ARK Invest's recent $12 million investment in Baidu? Does Wood's confidence in Baidu's potential outweigh the risks associated with the Chinese market, signaling a buying opportunity for those willing to take on the complexities?

Baidu's Pivot to an AI Powerhouse

Baidu initially built its dominance on internet search, securing a significant market share in China. The company has since transformed into an AI-focused organization. Although online marketing services, primarily search advertising, remain a key source of revenue, this segment has shown signs of slowing down. In contrast, Baidu's AI Cloud division has become a significant growth driver, holding the top spot in China's AI public cloud market for five consecutive years. 

Baidu's AI ambitions are further shown by the Ernie family of large language models, with recent versions like Ernie X1 and 4.5 competing against global counterparts and processing billions of API calls daily. The company's autonomous driving unit, Apollo Go, operates robotaxi services in multiple cities, has achieved significant driverless operation milestones, and recently expanded its testing to Dubai and Abu Dhabi. Baidu also holds a majority stake in the streaming service iQIYI and recently acquired YY Live Streaming. 

Cathie Wood's Re-Entry: The $12M Bet

Cathie Wood's ARK Invest made a move in late March 2025, purchasing around $12 million worth of Baidu shares across two of its exchange-traded funds (ETFs). This move marks a significant re-engagement with the Chinese tech giant after ARK Invest significantly reduced and eventually exited its Baidu holdings by late 2022 due to a heightened regulatory environment in Beijing. 

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While ARK Invest has not provided specific commentary on the transaction, the purchase aligns with the firm's focus on disruptive innovation. Baidu's advancements in generative AI with Ernie and its leadership in China's autonomous vehicle market through Apollo Go fit the profile of transformative technologies that ARK Invest seeks. Market observers may interpret Wood's investment as a signal that, despite ongoing risks, Baidu's progress in AI and its current valuation present a compelling growth narrative.

Is Baidu Undervalued After the Pullback?

As of early April 2025, Baidu's stock was trading around $92. Year-to-date, this represents an approximate gain of 8.7%, but it is still much lower than its 52-week high of $116.25. The stock has declined by roughly 15.5% over the past year. This pullback has led to a "buy the dip" argument.

The trailing-twelve-month price-to-earnings (P/E) ratio for Baidu is around 10, which is often considered low for a tech company that has significant growth initiatives. This could indicate that the stock is undervalued. A forward P/E ratio of approximately 12.5 suggests that earnings are expected to grow. The price/earnings-to-growth (PEG) ratio of close to 2.96 indicates that the stock price may be more in line with growth expectations than a deep value play. Other metrics like price-to-sales (around 0.24) and price-to-book (around 0.86) also seem low when compared to many of Baidu’s peers.

The consensus rating among the 19 analysts covering the stock is Hold, with 12 hold ratings and 7 Buy ratings. The average analyst price target of $111.25 suggests a potential upside of more than 21% from the current stock price. However, there is a wide range of price targets (from $85.00 to $141.00). Several investment banks have also recently downgraded their ratings. This reflects the ongoing uncertainty about the company's near-term trajectory and the broader risks associated with Chinese equities.

Baidu's Potential vs. Its Challenges

When considering Baidu as an investment, it’s important to balance its strong growth potential with notable risks. Key strengths include its dominance in China’s internet landscape, advancements in AI through Ernie and AI Cloud, progress in autonomous driving with Apollo Go, and a rapidly expanding ecosystem. Its attractive valuation, marked by a low P/E ratio, an active share repurchase program, and recent investment from Cathie Wood, further suggests potential gains.

However, regulatory uncertainty in China's tech sector, fierce competition, a weak online advertising market, and the substantial investments needed for AI and autonomous driving to become profitable pose significant challenges. Additionally, macroeconomic conditions in China and geopolitical tensions between the U.S. and China introduce further risks that investors must carefully evaluate.

Is Cathie Wood's Baidu Bet Worth Following?

Baidu is undeniably making significant strides in AI and autonomous vehicles. Its recent stock performance, coupled with Cathie Wood's renewed investment, hints at a potential buying opportunity. However, the regulatory landscape in China and intense competition pose substantial risks. While Wood's investment signals confidence, it does not negate these risks. Investors should carefully weigh Baidu's AI growth potential against the geopolitical and market-specific challenges inherent in Chinese stocks before making an investment decision.