Baidu’s $11b selloff shows struggle to meet AI hype

Baidu’s stock has dropped nearly 20% over the past month, reducing its market value by about US$11 billion since a three-year high on January 23.Baidu’s $11b selloff shows struggle to meet AI hype

The company is set to report December-quarter earnings amid investor concerns that its AI investments are not yet delivering significant growth.

Despite a strong cloud segment, analysts expect revenue and profit to decline year-on-year, partly due to weakness in its ad business.

The Hang Seng Tech Index has fallen 9% in the past month, with Baidu’s decline outpacing peers like Alibaba and Tencent, which each dropped around 12%.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

The hidden costs of Baidu’s AI pivot

Baidu’s latest quarter recorded a 7% year-over-year drop in total revenue 1.
Online marketing revenue, which tracks the advertising slowdown, slid 18% year-over-year in the third quarter 1.
Baidu took a RMB16.2 billion (US$2.27 billion) impairment charge tied to a Core asset group after reviewing its infrastructure portfolio, a near-term hit linked to building out AI computing capacity 1.
AI-powered businesses brought in roughly RMB10 billion, up over 50% year-over-year, and AI-native marketing services reached RMB2.8 billion, up 262% year-over-year, yet the gains did not cover the broader declines or the impairment-driven losses 1.

Investors are betting on startups, not giants, in China’s AI race

Competition from newer players such as DeepSeek has added pressure on Baidu, and market attention has shifted accordingly.
Since December, AI-linked initial public offerings (IPOs) have created seven new Chinese billionaires and brought in $2.9 billion in proceeds 2.
As Baidu shares fall, Zhipu AI (a Chinese AI model developer) jumped nearly 30% in one day after releasing a new model, even though it remains unprofitable 3.
Funding continues to flow to pure-play AI firms with large deficits, including MiniMax (a Chinese AI startup), which has racked up about $1.3 billion in losses over four years and $512 million in the first three quarters of last year 4.
For established companies like Baidu, investors remain doubtful that legacy businesses such as advertising or consumer search can shift fast enough while facing focused, well-funded challengers.