Baidu Stock (BIDU) Added to Watch List as Bullish Catalysts Expected

Baidu's stock (NASDAQ: BIDU) is up 2.66% into the pre-market session, with one analyst highlighting upcoming catalysts that could unlock further value. The stock has been placed on a “90-day positive catalyst watch,” at Citi, suggesting bullish momentum in the coming months.

Citi initiated this “90-day positive catalyst watch” while maintaining a Buy rating and a $181 price target. The firm's optimism stems from the expectation that Baidu will enhance its disclosures regarding artificial intelligence (AI)-driven revenue. Furthermore, the ongoing investments in the Ernie model are projected to contribute significantly to shareholder value. The expectation is that markets will gain confidence in Baidu's operational trajectory and its ability to leverage its assets effectively.

The recent surge in Baidu's stock price following an upgrade from J.P. Morgan underscores the growing confidence in the company's AI capabilities. In November, J.P. Morgan upgraded Baidu from Neutral to Overweight, raising the price target substantially from $110 to $188. This decision was influenced by the firm's positive outlook on Baidu's AI cloud business and projections of a sixfold increase in Kunlun AI chip sales by 2026. The market reacted favorably, with Baidu's stock jumping 7% after the announcement.

Financial Headwinds and Strategic Pivots

Baidu's strategic investments in AI and cloud infrastructure are becoming increasingly evident. In the third quarter of 2025, the company's AI cloud revenue experienced a robust 21% year-over-year growth, reaching RMB 6.2 billion. This expansion was primarily fueled by a 33% increase in infrastructure services and a remarkable 128% surge in subscription-based AI acceleration revenue. These figures highlight Baidu's deliberate pivot towards AI and cloud services as pivotal revenue streams.

Conversely, Baidu has faced some headwinds. The company reported a 7% decline in total revenue for Q3 2025, amounting to RMB 31.17 billion. This downturn was primarily attributed to an 18% drop in online advertising revenue, reflecting broader market softness amidst China's economic challenges. Additionally, Baidu posted a net loss of RMB 11.23 billion, largely due to asset write-downs.

Baidu's AI chip subsidiary, Kunlunxin, valued at approximately $3 billion, is preparing for an initial public offering (IPO) in Hong Kong. This strategic move aligns with China's broader initiatives to bolster domestic semiconductor production in the face of U.S. export restrictions. Kunlunxin's latest chip, the P800, is gaining traction in state-backed data center projects, with new products M100 and M300 slated for release in 2026 and 2027, respectively.

However, regulatory concerns also loom. The Pentagon has recommended adding Baidu to the U.S. Department of Defense's Section 1260H list, which identifies companies suspected of supporting China's military. While inclusion on this list does not automatically trigger sanctions, it presents reputational and strategic risks for U.S. firms engaging with Baidu.

Analyst upgrades and positive sentiment surrounding Baidu's AI initiatives have supported market confidence, however, the company's financial performance and external pressures necessitate a balanced outlook. Today's price action reflects the market's anticipation of upcoming catalysts, emphasizing the need for careful monitoring of Baidu's progress in AI and cloud sectors.