Deutsche Bank Bullish on Baidu: Upgrades to "Buy" with $156 Price Target
Deutsche Bank just slapped a turbocharged 'Buy' rating on Baidu—jacking its price target to $156. Wall Street's latest love affair with Chinese tech plays out like a rerun, but hey, at least the algorithms are excited.
Why the upgrade? AI momentum, ad revenue resilience, and that sweet, sweet government-approved tech rebound narrative. Because nothing says 'stable growth' like navigating Beijing's regulatory mood swings.
Bonus cynicism: Another day, another bank upgrading a stock after the easy money's been made. But sure, this time it's 'different.'
Advertising slowdown hits near-term revenue
In the short term, Leo expects advertising challenges to reduce monetization, ultimately causing total revenue to decline by 3% year over year in the fiscal year 2025. In juxtaposition, he expects cloud revenue to increase by 23% on a yearly basis this fiscal year.
Leo commented that fiscal 2026 and beyond could show a rebound in total revenue once advertising levels stabilize. He pointed to improvements expected from digital humans, AI-based search monetization, stronger cloud contracts, higher AI chip shipments, and eventual profit returns from the robotaxi network when cities approve paid driverless service zones.
Leo pointed out that the robotaxi program expanding its global footprint introduces the company to new regulatory environments, new infrastructure layouts, and new competition, but he said the platform is already proving its operational readiness.
AI spending surges amid broader uncertainty in stock markets
The Baidu upgrade comes at a time when Amazon, Microsoft, and Google have reported higher capital expenditures for AI infrastructure in their Q3 earnings report, making investors and traders alike concerned over whether returns will appear fast enough to justify the scale of investment.
Earlier this week, Goldman Sachs CEO David Solomon warned that the equity markets could fall 10% to 20% within the next two years, saying the market may be overestimating the certainty of long-term AI profits.
Bank of England Governor Andrew Bailey said in an interview that while AI could boost productivity, there is still uncertainty around future earnings streams, which makes pricing assets difficult. “We have to be very alert to these risks.”
In Asia, SoftBank Group, which is involved across AI infrastructure and semiconductor investment, has lost about $50 billion in value over the last week. Its shares continued to decline after a steep drop earlier in the week.
On Tuesday, it was reported that Scion Asset Management, led by Michael Burry, had opened short positions against Palantir Technologies and Nvidia, prompting a response from Palantir CEO Alex Karp.
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