JPMorgan has released a research report reassessing the business structure of Baidu Group-SW (09888). The firm has raised its target price for Baidu's Hong Kong-listed shares from HK$195 to HK$225 and for its US-listed shares (BIDU.US) from $200 to $230, while maintaining an "Overweight" rating. The bank forecasts that as the proportion of AI business increases systematically and the drag from the advertising business weakens due to a smaller base, this trend will continue to strengthen through 2026.

The report notes that the market previously anticipated a rotation of funds from Baidu to Kunlun Chip following the latter's listing. However, Baidu's first-quarter performance this year has countered this narrative. Revenue from Baidu's core AI business reached RMB 13.6 billion, marking a 49% year-over-year increase and, for the first time, accounting for over half of Baidu's core business revenue at 52%. The bank's updated sum-of-the-parts (SOTP) valuation indicates that the AI business alone is valued at approximately $169 per ADS, which exceeds the current share price level before accounting for the traditional business, iQIYI, or net cash.