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   Technology StocksBaidu (BIDU)

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From: Frank Sully8/19/2021 1:45:50 PM
   of 2014
Baidu reveals its maximally autonomous 'robocar'

Thu, 19 August 2021, 6:52 AM

A new autonomous car concept has just been announced by Baidu.

Baidu, the Chinese technology giant behind the country's search engine, has just announced a level 5 SAE autonomous car thanks to a new chip. Behind this potential success is an ambitious open source platform called Apollo.

Communications stunt or masterstroke? At the end of 2018, John Krafcik, boss of Waymo at the time (Alphabet's autonomous car subsidiary) explained that it would be another decade before we see fully autonomous cars on the roads. Three years later, Baidu is unveiling its "robocar," which the company has created at the highest level of autonomy, stage 5 SAE. It's pretty surprising, as this level of independence seems difficult to reach.

The car would be able to manage itself, in all circumstances, without human intervention. For the moment, it's hard to believe, as the remaining obstacles before a completely autonomous car could be achieved seem to be numerous. The production of a new second-generation Kunlun chip specialized in calculations and artificial intelligence seems to be part of the solution. Its calculation capacity is two to three times higher than the old chips.

Baidu took more than eight years to develop its "robocar," whose name has not yet been revealed. With its zero-gravity seats, voice and facial recognition, and advanced artificial intelligence capabilities, the prototype vehicle is "more robot than car," according to Baidu CEO Robin Li. The zero-gravity seats allow for a natural posture that minimizes stress on bones and joints to achieve the neutral spinal position that humans adopt in a weightless situation. The two-seater vehicle - with no steering wheel or pedals - has two retractable doors, a large intelligent curved screen, and a control pad.

Apollo open source platform

Baidu's advantage in the race to develop self-driving cars lies in its Apollo platform. Dozens of global automakers, automotive component suppliers, and technology companies have joined Baidu's open source program to enable mass production of its cars. Baidu is taking this different approach to distinguish itself from its competition. The clean technology used to build an autonomous vehicle is less important than the smart infrastructure it is connected to, according to the company.

We saw a short demonstration of the vehicle during the Chinese company's conference, but as yet there were no groundbreaking surprises. Baidu showed its vehicle bypassing obstacles, making U-turns, and changing its direction when directed by the user. The expected release date of the robocar is still unknown.

Axel Barre

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From: Frank Sully8/19/2021 2:16:17 PM
1 Recommendation   of 2014
Baidu Announces Upgraded Baidu Brain 7.0 and Mass Production of 2nd Generation Kunlun AI ChipAugust 18, 2021

BEIJING, Aug. 18, 2021 — Baidu today showcased its strengths in artificial intelligence technology with the launch of Baidu Brain 7.0, the start of mass production of its second-generation Kunlun AI chip, Kunlun II, and the demonstration of industrial applications using Baidu AI Cloud. Shared at Baidu World 2021, Baidu’s annual flagship technology conference, the announcements represent the depth of Baidu’s expertise in AI technology and industrial practice, and its efforts to make AI technology more accessible.

“AI technology is growing increasingly complex, and integrated innovation has made AI more powerful,” said Haifeng Wang, Baidu’s Chief Technology Officer at Baidu World 2021. As AI technology plays an expanding role in a wider range of industries and drives a new era of technological revolution and industrial transformation, it is increasingly important to lower the threshold for different real-world applications and to increase accessibility to AI development platforms.

A key infrastructure supporting industrial applications of AI and Baidu Cloud, Baidu Brain is one of the world’s largest AI open platforms. The newly upgraded Baidu Brain 7.0 offers greater integration of a wide array of knowledge sources and deep learning, including language comprehension and reasoning, using numerous combined technologies to enable output across language, voice and visual formats.

Working together with Baidu Brain 7.0’s software capabilities is the new Kunlun II AI Chip, providing an improved hardware foundation for a new generation of AI applications. Independently developed by Baidu, Kunlun II offers 2-3 times more processing power than the previous generation, using the world’s leading 7nm process and equipped with Baidu’s own second-generation XPU architecture.

The chip can be applied in multiple scenarios, including cloud, terminal, and edge, able to empower high-performance computer clusters, biocomputing and intelligent transportation and autonomous driving. Specifically optimized for AI technologies such as voice, natural language processing and images, the new Kunlun chip supports deep learning frameworks such as Baidu’s open-source platform PaddlePaddle. This diverse range of uses gives the 2nd generation Kunlun AI Chip a powerful potential role in powering AI applications ranging from Internet core algorithms to smart cities and smart industry.

Both Baidu Brain 7.0 and Kunlun II allow for significantly enhanced accessibility and ease of use. Together with Baidu’s PaddlePaddle, the bundled AI platform offers a diverse product system to help different types of developers use AI technology quickly and efficiently, providing a wealth of tools to simplify the development and implementation of AI in real-world scenarios.

To date, more than 3.6 million developers around the world have developed 400,000 AI models through PaddlePaddle, serving over 130,000 enterprises and institutions across a range of fields and industries. Applications have helped water management systems run more efficiently, helped improve quality control in manufacturing, and even helped athletes achieve greater precision in their training.

As part of Baidu’s efforts to increase the accessibility of AI technology, the company also announced the launch of Songguo Academy at Baidu World 2021. Providing a full set of educational resources, from long-term courses of study and training seminars to competitions, Songguo Academy draws on support from both the tech industry and academia to build a platform for training a new generation of AI professionals.

Baidu believes that the potential of AI is bright and limitless. Baidu Brain, the Kunlun II AI chip, PaddlePaddle and other software and hardware are a powerful combination delivering transformative AI technologies, which are set to serve users everywhere in the future. In this era of great change, Baidu is pursuing innovative AI applications that will benefit humanity and improve the lives of all in the future.

To see the recording of the conference with English translation, please visit: YouTube: Live: How will AI shape our life and future?

About Baidu

Founded in 2000, Baidu’s mission is to make the complicated world simpler through technology. Baidu is a leading AI company with a strong Internet foundation. Baidu is traded on the NASDAQ Global Select Market under the symbol “BIDU”, and on the main board of the Hong Kong Stock Exchange under the stock code “9888”. Currently, one ADS represents eight Class A ordinary shares.

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From: Frank Sully8/21/2021 4:00:33 PM
   of 2014
China’s Financial Certification Authority Teams up with Baidu on Artificial Intelligence and Digital Transformation

By CBNEditor

August 20, 2021

The top authority for financial certification in China has entered strategic cooperation with one of the country’s leading Internet companies to drive digital transformation.

The China Financial Certification Authority (CFCA) signed a strategic cooperative agreement with Chinese search engine Baidu on 18 August, for the purpose of “using deeper technological and scenario integration and joint innovation to jointly create an industry tech ecosystem.”

CFCA said that strategic cooperation with Baidu would help to drive the application of artificial intelligence, big data and cloud computing to its operations.

The Chinese central bank led the establishment of CFCA in 1998, and it has since evolved into a “leading tech enterprise whose core is integrated online security services,” and “one of the nation’s key financial information security infrastructure projects.”

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From: Glenn Petersen8/24/2021 4:18:35 AM
1 Recommendation   of 2014
Chinese tech stocks rally as surges 13%, Tencent climbs 7%



-- Chinese tech stocks listed in Hong Kong including Tencent, Alibaba and surged on Tuesday.

-- These names have been badly beaten up as a result of a tightening regulatory environment for the tech sector in China.

-- After China passed a major data protection law on Friday, analysts said the pace of the introduction of new laws could slow and tech giants can still grow.
BIDU+6.35 (+4.45%)

.HSI+559.99 (+2.23%)

BABA+8.63 (+5.36%)

3690-HK+24.80 (+12.69%)

700-HK+36.00 (+8.30%)

9618-HK+36.40 (+14.94%)

GUANGZHOU, China — Hong Kong-listed Chinese tech stocks staged a huge rally Tuesday as investors got a little more clarity on the regulatory outlook and bought some of the names that have taken a beating in recent months.

A positive set of earnings from Chinese technology giants also added to the bullish sentiment.

The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, was up 6%, outperforming the broader index which rose 2%.

Tencent shares rallied 7%, food delivery giant Meituan was around 12% higher, while Alibaba’s Hong Kong-listed stock popped 7%.

E-commerce giant surged over 13% after its second-quarter earnings beat market expectations. Cathie Wood’s Ark Investment Management also snapped up 164,889 of’s American depository receipts (ADRs) on Monday.

Last week, the tech-heavy Hang Seng index slipped into bear market territory, dropping more than 20% from its mid-February peak. The benchmark has since recovered slightly, but is still 18% below its February level. Meanwhile, China’s technology giants have shed billions of dollars of value.

The sell-off has been driven by China’s tightening regulatory regime. New laws have been introduced at a rapid pace, followed by punishments and investigations by Chinese authorities.

Some investors may be taking advantage of the steep fall in share prices, seeing the sell-off as a buying opportunity.

“Our overall view is that we prefer to look for value. In Asia, the markets are not as frothy as in the U.S. after the recent drops ... (due to) the HK/China issues and this is probably where we would look,” said Lorraine Tan, director of equity research for Asia at Morningstar.

Earlier this year, regulators introduced anti-monopoly rules targeting so-called platform companies. This month, regulators issued draft rules to stop unfair competition in the internet sector. On Friday, China passed a major data privacy law — called the Personal Information Protection Law (PIPL) — which takes effect in November, following two other key data policies.

The slew of regulation may have provided some short-term clarity for the market, while the pace of new laws might slow.

“The capital market probably feels that the release of the PIPL ... completes the trifecta of China’s data governance regime, such that Chinese regulators may finally take a pause in 2021 from unabating lawmaking for the tech industry that was little regulated last decade,” said Winston Ma, adjunct professor of law at the New York University School of Law.

Recent earnings reports from Chinese technology companies have been broadly positive too. Tencent’s second-quarter net profit beat estimates while Baidu’s revenue for the quarter was ahead of analyst expectations.

Across various earnings calls, regulation was the hot topic. Tencent’s management warned last week that further regulation is likely for the internet industry but said it is “confident” the company can be compliant. On Tuesday, Lei Xu, CEO of JD’s core retail division, said the company has carried out an internal “review” and “rectification” process to comply with regulations and doesn’t see a major business impact.

“We think most of the broad framework for the internet regulations is set. We believe that the moats of names like Alibaba and Tencent are still prevalent and their free cash flow will still be relatively attractive,” Morningstar’s Tan said.

With many major technology earnings out and key legislation passed, one analyst expects investors to be looking toward next year.

“Investors should be able to glean much better insight into sub-sector trends and company outlooks during earnings season,” Jefferies equity analyst Thomas Chong wrote in a note published Monday.

“Indeed, a number of key issues have already been addressed. With the drastic pullback in sector valuation in recent months ... and the passing of the personal data privacy law last Friday, we expect a re-focus on sector themes as expectations continue to be reset, with the 2022 story the next waypoint, rather than the outlook for 4Q.”

China tech stocks rally:, Tencent, Alibaba (

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From: Frank Sully8/24/2021 9:45:18 AM
1 Recommendation   of 2014
Baidu's AI voice assistant Xiaodu closes funding at $5.1 bln valuation

August 24, 2021

Chinese tech giant Baidu Inc said on Tuesday its artificial intelligence (AI) voice assistant Xiaodu Technology has closed Series B financing at a $5.1 billion valuation.

This comes in the midst of a regulatory crackdown on the tech industry by the Chinese authorities that has led to an upheaval in many sectors including as e-commerce, ride-hailing and cryptocurrency.

Xiaodu is the developer of DuerOS, a voice assistant system based on AI that supports television, speakers and other smart home appliances. It completed its Series A funding in November 2020 at a post-money valuation of $2.9 billion, said Baidu.

Earlier in March, Baidu said that its AI chip unit Kunlun also completed a round of fundraising, which according to one source with direct knowledge of the matter valued the business at about $2 billion. (

Baidu said on Tuesday that after the transaction it would remain a majority shareholder. (Reporting by Tiyashi Datta in Bengaluru; Editing by Rashmi Aich)

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From: Frank Sully8/24/2021 11:16:23 AM
   of 2014
Baidu stock surges

Stock , BIDU
155.03 +12.27 +8.59%
11:13:45 AM

I was planning on buying more yesterday but I’m waiting for a transaction to clear. May take a few days. Hope Baidu doesn’t go too crazy before then!

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From: Frank Sully8/27/2021 12:30:09 AM
   of 2014
The AI Training Chip Tencent Has an Eye On
Nicole Hemsoth

14 hours ago

It is not news that China wants a rich, native, diverse semiconductor ecosystem to feed its largest consumers of compute. From supercomputing systems to those that power the country’s largest online social and retail platforms, there is a close reckoning for US-based chipmakers.

China’s top supercomputers — including the Sunway TaihuLight machine or the mighty Tianhe-2A — are packed with native technologies, from chips to interconnects. And its social media giants, including Alibaba and Baidu, are already in production with their own devices for AI training and inference at massive scale.

One of China’s hyperscalers, Tencent, has yet to roll out its own chips. But it’s worth noting it has invested mightily in Shanghai-based Enflame, which will soon be releasing its first-generation AI training devices — DTU 1.0 — which have been in development since 2018. Over the last three years, Enflame has raised close to $500 million, with Tencent leading the charge.

What is interesting about the DTU 1.0 device is that there is nothing particularly interesting about it at all. In other words, it isn’t trying to do anything outlandish. That’s not to say it is a simple device as there are some unique features, but Enflame is not taking a route that pitches mind-boggling core counts, non-mainstream precision or model types, or taking chances with packaging.

The question in our minds is what this device can do that a GPU can’t for large-scale training. The answer might simply be that it can be a Chinese native technology for Enflame’s most enthusiastic backer, Tencent — the company that needs to follow its Chinese hyperscale brethren by building (or buying its way into) homegrown AI hardware.

We finally a got a look at Enflame’s 12nm FinFET training SOC at Hot Chips this week. The neat package below shows 32 “AI compute cores” separated into four clusters. Forty additional host processing modules push the data around along four of Enflame’s own interconnects. Each device has two HBM2 modules for 512GB/sec bandwidth.

The AI portion has much in common with the same TensorCore concept we saw first from Nvidia and which is now being added into designs for several other CPUs. Enflame says it can reach 20 teraflops at FP32. The device also supports FP16 and Bfloat (both reaching peak 80 teraflops) and can support mixed precision workloads with Int-32, 18 and 8. Each of these is based on a 256 tensor compute kernel.

Here is a closer look at the tensor units:

The chip is designed with GEMM operations and CNNs in mind, which is right up Tencent’s alley as it is largely driven by visual media (video, photos, ecommerce).

The startup is providing a PCIe Gen4 accelerator card called “CloudBlazer” and consumes between 225W and 300W depending on configuration, the highest consumer being the CloudBlazer T21 based on the Open Compute Project’s OAM (open acceleration model) design. In addition to the PCIe-only device, Enflame has packed together systems, ranging from a single node to rack to “pod” featuring its 2D torus interconnect.

Enflame shared scaling results for the various configurations, showing single cards hitting 81.6 per cent when scaled to 160 cards and 87.8 per cent when packaged into a node. This is on par with what we’ve seen with GPU scalability roughly, although it’s not an apples-to-apples comparison.

The startup has a shot at providing AI training acceleration for China’s hyperscalers but it also has some roots in the US. The CEO and co-founder, Lidong Zhao, spent 20 years in the Bay Area at both R&D and product roles with GPUs — although not at Nvidia. He spent seven of those years at AMD running product for its CPU/APU division before helping AMD establish an R&D center in China. Before that he was developing network security devices and also spent time at S3 Inc. working on GPU development.

Co-founder and Enflame COO, Zhang Yalin, was a colleague at AMD, serving as senior chip manager and technical manager for global device R&D with work on AMD’s early GPUs as well.

“Artificial intelligence is at the heart of the digital economy infrastructure of the future and a battleground for hard technology,” Enflame founder and CEO Zhao Lidong says.

“As a technology-driven company, we have planned and are fully implementing the product technology roadmap for the next three years, with joint development of hardware and software systems as the core for product iterations to establish the competitive advantage of Enflame technology in the market. At the same time, we will also increase the exploration of cutting-edge technologies in the field of artificial intelligence so that future innovation enables greater commercial value.”

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From: Frank Sully8/29/2021 3:01:55 PM
   of 2014
Speech and Voice Recognition Market Is Expected to Grow at a CAGR of 21.6% During 2021-2026

Northbrook, IL -- ( SBWIRE) -- 08/27/2021 -- According to the new market research report "Speech and Voice Recognition Market with COVID-19 Impact Analysis by Delivery Method, Deployment Mode (On Cloud, On-Premises/Embedded), Technology (Speech Recognition, Voice Recognition), Vertical and Geography – Global Forecast to 2026", published by MarketsandMarkets™, the Speech And Voice Recognition Market is expected to grow from USD 8.3 billion in 2021 to USD 22.0 billion by 2026; it is expected to grow at a CAGR of 21.6% during the forecast period. The major driving factors for the growth of the speech and voice recognition market include increase in use of smart appliance and use of artificial intelligence technology to boost accuracy of speech and voice recognition system. The COVID-19 outbreak resulted in a decline in the growth rate of the speech and voice recognition market, especially in 2020 and 2021. The COVID-19 pandemic affected the speech and voice recognition market both positively and negatively. The demand for smart appliances and devices has increased with most of the population working from home. This has also created an opportunity for the speech and voice recognition market as this technology is being used in various smart devices. However, many people are also focusing on basic amenities during the pandemic, putting off other purchases for the time being. The COVID-19 pandemic has also resulted in halted production, thus affecting the manufacturing capabilities of all regions; the supply of products from manufacturers to end users has declined drastically as a result.

Speech Recognition technology shows significant increase in speech and voice recognition market during the forecast period.

Growing demand for speech-enabled consumer electronics devices including smart home devices, mobile devices, and wearable devices is expected to result in rapid growth of the speech recognition market during the forecast period. The automatic speech recognition (ASR) segment is expected to record the highest CAGR in the forecast period. The growing accuracy of ASR technology offered by Chinese vendors, such as Baidu (China) and iFLYTEK (China) is expected to benefit the entire value chain for the automatic speech recognition market in Asia Pacific during the forecast period. The growing need for local language-based speech recognition software in South Asian countries is expected to provide ample growth opportunities for the ASR market in APAC during the forecast period.

On-premises/embedded deployment mode to grow significantly during the forecast period

The demand for on-premises/embedded infrastructure is expected to increase in the forecast period. Americas will lead the market for the on-premises/embedded segment as a result of more companies demanding on-premises/embedded deployment. The increasing demand for on-premises/embedded infrastructure is also leading to an increase in the number of providers in the Americas, thereby improving the overall market growth.

Consumer vertical to have the largest market share during the forecast period

In 2020, the consumer vertical accounted for the largest size of the speech and voice recognition market and is expected to hold a dominant position throughout the forecast period. The introduction of voice based smart devices in the consumer sector has led to the launch of many innovative products in the market. The continuous decline in the cost of voice and speech devices, software developments, and relevant content developments are also driving the market for speech and voice recognition. The increasing demand for intelligent virtual assistant smart speakers with voice capabilities is expected to be a prominent driver for the speech and voice recognition market for the consumer vertical during the forecast period.

APAC to grow with highest CAGR for speech and voice recognition market during the forecast period

The market in APAC is expected to grow during the forecast period. The growing focus on artificial intelligence (AI) in industries and enterprises is also expected to contribute toward the growth of the voice recognition market in Asia Pacific during the forecast period. Increasing digitalization and government policies favoring digitalization and technological innovations are also expected to drive the growth of market in APAC region.

Key Market Players:

Apple (US), Microsoft (US), IBM (US), Alphabet (US), Amazon (US), Sensory (US), CANTAB Research (UK), Baidu (China), iFLYTEK (China) and SESTEK (Turkey) are among the key players operating in the speech and voice recognition market.

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From: Frank Sully8/30/2021 12:46:30 PM
   of 2014
Bought more Baidu

I bought another 180 shares of Baidu at $152 per share. This brings my total up to 300 shares at an average cost of $174 per share. This is a long-term investment into their AI future.


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From: Frank Sully8/30/2021 2:23:04 PM
1 Recommendation   of 2014
Baidu: Cash Position Reflects ~50% Of Market Cap

Aug. 26, 2021 10:39 AM
Baidu, Inc. (BIDU)

  • Baidu's cash and cash equivalents position reached a new record of ~$26 billion (excluding iQIYI).
  • This represents around 50% of the current market cap, which is remarkable.
  • On a net basis (i.e. after subtracting loans and notes payable), the net cash position represents around 25% of the market cap, which is still remarkable.
  • Annual operating cash flow is poised to surpass the $5 billion mark and cash-rich Baidu will get cash richer.
  • Investors who buy Baidu at current depressed valuations are likely to be rewarded handsomely especially when various AI initiatives take off.

Sundry Photography/iStock Editorial via Getty Images

Baidu ( BIDU) is feeling the pain along with the broader Chinese tech sector as a result of China’s regulatory crackdown. BIDU is down almost 30% on a YTD basis and sentiment is at rock bottom levels.

Data by YCharts

Even worse, BIDU is down more than 50% from its peak (above $330 per share) reached in February 2021.

Data by YCharts

All of this is happening despite global markets hovering around record highs and, more importantly, despite BIDU's solid financial performance and global leadership in AI (artificial intelligence), including self-driving technology through Apollo (robotaxis, robobuses, etc.).

Source: Asia Times

When thinking of AI powerhouses and global leadership in general, the focus tends to be around the US tech giants such as Alphabet ( GOOG) (NASDAQ: GOOGL) and Microsoft ( MSFT). Baidu is often referred to as the 'Google of China' since it dominates China's internet search engine market, controlling more than 70% of the market share. However, just like Google, it's so much more than just a search engine. Baidu has exposure to several exciting high growth areas, including among others, AI, chips ( Kunlun was recently spun off), cloud computing, intelligent driving/electric vehicles, etc. The list goes on. It also owns a strategic stake in iQIYI (the 'Netflix of China').

One thing is for sure: Baidu is placing its future on AI. It is no coincidence that today Baidu refers to itself as "a leading AI company with a strong Internet foundation" whereas up until recently, specifically until Q4 2019 earnings, Baidu described itself as "a leading search engine, knowledge and information centered Internet platform and AI company". It is clear that Baidu is repositioning itself to shift investor perception away from being viewed as 'a search engine with some AI capabilities' to being viewed as a 'leading AI player which also happens to own a leading search engine among other things'. Baidu elaborates on its leading AI position as follows:
  • We are one of the very few companies in the world that offers a full AI stack, encompassing an infrastructure consists of AI chips, deep learning framework, core AI capabilities, such as natural language processing, knowledge graph, speech recognition, computer vision and augmented reality, as well as an open AI platform to facilitate wide application and use. We have put our leading AI capabilities into our products and services, as well as innovative use cases.
All this sounds good on paper. However, unlike Google, Baidu gets very little recognition by the market as evidenced by the very low valuation. This has been further exacerbated by the regulatory crackdown.

Going back to financials, I feel that I am getting an amazingly good bargain with Baidu trading at ~$150 per share, underpinned by strong cash flow generation, which in turn translates into a fortress balance sheet (an ever-increasing cash balance). Specifically, annual cash from operations has consistently exceeded the $3 billion mark since 2015, surpassing $5 billion for FY 2017 and FY 2018. For the 12 months ended December 2020 cash from operations stood at ~$3.7 billion.

Baidu's Annual Cash from Operations:

Source: Seeking Alpha

Overall, the trend has been positive since 2011 but not in a linear fashion (there have been several ups and downs). On the other hand, the evolution of Baidu's cash position has followed a linear pattern. Specifically, as of 30 June 2021, Baidu's total cash, cash equivalents and short-term investments reached a new record of ~$26 billion (excluding iQIYI).

Baidu's Total Cash & ST Investments:

Source: Seeking Alpha

The total cash balance of ~$26 billion represents around 50% of the current market cap, which is remarkable! What's more, on a net basis (i.e. after subtracting loans and notes payable), the net cash position stands at ~$13 billion which represents around 25% of the market cap, which is still remarkable and demonstrates that the market is placing very little value to Baidu's AI projects, legacy search business, iQIYI, etc.

Going forward, things are likely to get better for Baidu. Revenue growth is exceeding 25% YoY (boosted by AI cloud growing 71% YoY). Intelligent driving and other growth initiatives, including Xiaodu which recently closed a new funding round at a $5.1 billion valuation, will help drive future revenue growth. As such, it is reasonable to assume that eventually annual net operating cash flow will consistently surpass the $5 billion mark and cash-rich Baidu will get cash richer. Management seems to share my confidence in the company's future prospects and is buying back shares, bringing the cumulative repurchase to $2.5 billion since 2020 under the 2020 Share Repurchase Program. Unlike others, I see the recent sell-off as a great buying opportunity. Sure, there are risks, mostly regulatory, but I feel increasingly comfortable especially with the company's large and growing cash position, which provides a margin of safety. A strong cash cushion will help the company weather the storm without derailing the long-term AI-oriented plan.

That said, one could argue that we are all very well aware that Baidu's business is strong, with promising AI prospects and a fortress balance sheet, but this has not been enough to prevent the share price from crashing more than 50% from its all-time high. Fair enough. My response is as follows: There is no doubt that sentiment is at rock bottom levels right now. We can debate all day about the Chinese government's intentions and regulatory concerns in general, but I feel we have reached the point of excessive fear which leads to overanalyzing things, sometimes reaching paranoia levels. To a large extent, this fear is driven by US-China relations. In times of turmoil, one needs to take a step back from the headlines and go back to basics, focusing on long-term fundamentals. I have stressed tested my investment thesis via the following conservative scenario:
  • 10-year horizon
  • annual operating cash flow run rate of $3 billion (note this is $700 million lower than last year's figure and a level not seen since 2014) - in other words, I am factoring in that regulators will suppress Baidu's ambitions and growth
  • a static, zero-growth world meaning that over the next decade, annual operating cash flow will remain constant at $3 billion, and this cash is simply accumulated - in other words, I am assuming zero revenue growth, zero R&D/innovation, zero share repurchases, zero dividends, zero M&A, etc.
While many might think that the above scenario is pessimistic, it is better to be on the safe side. I will become even more pessimistic by assuming an artificially high maintenance CAPEX requirement of $1 billion per year in order to maintain existing levels of operations. Even in this adverse scenario, Baidu can accumulate cash of $2 billion per annum, or $20 billion over the next decade, all else constant. Note, this $20 billion will be added on top of the existing cash balance of ~$26 billion. In other words, over the next 10 years, the total cash balance will surpass 85% of Baidu's current market cap, all else constant. This suggests that the margin of safety is huge and Baidu's valuation is dirt cheap. That said, for what it's worth, my view is that 10 years from now, Baidu will be generating operating cash flow of at least $7.5 billion per annum, driven by various AI initiatives and Apollo taking the front seat. Also, don't discount the legacy search business as it will continue to generate attractive levels of cash flow. These are challenging times and it will take some time for the dust to settle. Baidu has been on my radar for years and the recent sell-off made me comfortable to initiate a position. Always remember, the value of cash is unambiguous, and cash is king. At some point, the market will not be able to disregard Baidu's growing cash balance as a percentage of market cap. I don't think it is even remotely possible that we will ever see Benjamin Graham's extreme net-net situations whereby the cash position exceeds all liabilities and the market cap ends up being lower than the net cash position.

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