Baidu Inc. (BIDU) is making a bold play to unlock value from its artificial intelligence operations, and investors are paying attention. The Chinese tech giant announced plans to spin off Kunlunxin, its AI chip subsidiary, for a separate listing on the Hong Kong Stock Exchange. Baidu shares jumped nearly 12% in premarket trading following the announcement, trading close to their 52-week high.
Why Spin Off the Chip Business Now?
Baidu currently owns 59% of Kunlunxin and plans to maintain majority control even after the listing, keeping it as a subsidiary. The proposed spinoff would position Kunlunxin as a standalone public company, giving investors direct exposure to the AI chip business while expanding the unit's financing options and strengthening management accountability.
The company has already submitted a listing application to the Hong Kong Exchange seeking approval for Kunlunxin's H-share offering. The goal is to raise the chip unit's market profile and better align its growth trajectory with investor expectations in the rapidly expanding AI semiconductor space.
But here's the catch: key details remain undecided, and the whole plan still requires regulatory approvals. Baidu has cautioned that there's no certainty the spinoff will actually happen or when it might occur.
Kunlunxin's Growing Business
The numbers suggest Kunlunxin has real momentum. According to Reuters, the unit's revenue exceeded 3.5 billion yuan (roughly $500 million) last year and reached breakeven. External customers are expected to contribute more than half of revenue in 2025, a sign the business is expanding beyond Baidu's internal needs.
The unit recently raised over 2 billion yuan in a funding round that valued the business at approximately 21 billion yuan. China Mobile participated in that round, and Kunlunxin secured more than 1 billion yuan in orders from suppliers to the telecom giant.
JPMorgan analysts are optimistic, forecasting that Kunlunxin's chip sales could surge sixfold to 8 billion yuan by 2026. That kind of growth would be impressive, though analysts caution that Kunlunxin's chips cannot fully replace Nvidia's (NVDA) most advanced offerings.
The Bigger Picture: China's Chip Independence Push
This spinoff isn't happening in a vacuum. U.S.-China technology tensions continue to simmer, with restrictions from both Washington and Beijing limiting Chinese firms' access to cutting-edge AI chips from Nvidia.
Chinese policymakers have responded by encouraging domestic chip adoption and directing billions of dollars toward local semiconductor development. Kunlunxin is expected to work alongside domestic peers such as Huawei Ascend, Cambricon, and Alibaba Group (BABA) to help build a broader homegrown AI computing ecosystem.
The strategy is clear: if Chinese tech companies can't reliably access the world's best chips, they'll build their own alternatives. It's not about matching Nvidia chip-for-chip but creating a viable domestic supply chain that can support China's AI ambitions.
Market Reaction and What's Next
Investors seem to like the direction Baidu is heading. The stock has gained 58% over the past 12 months, driven by optimism surrounding the company's aggressive artificial intelligence strategy. Trading near $146.26 in premarket action, shares are hovering close to their 52-week high of $149.51.
The question now is whether Kunlunxin can execute on its growth plans and whether the Hong Kong listing will actually materialize. With regulatory hurdles still ahead and geopolitical tensions showing no signs of easing, there's plenty that could complicate this story. But for now, Baidu is making its bet that AI chips represent a valuable standalone business worth highlighting to the market.