Baidu Mulls Hong Kong Spin-off for Kunlunxin Chip Unit as China Semiconductor Deals Surge

Baidu has confirmed preliminary discussions regarding the spin-off and subsequent initial public offering (IPO) of Kunlunxin (Beijing) Technology on the Hong Kong Stock Exchange. Reports indicate that the unit aims to file for the listing as early as the first quarter of 2026. The move follows a fresh fundraising round that elevated Kunlunxin's valuation to roughly 21 billion yuan (US$2.97 billion). As the majority shareholder with a stake of approximately 60%, Baidu is positioning the unit to operate independently while retaining strategic control. The capital raised is expected to fuel R&D for next-generation AI accelerators, which are critical for training large language models like Baidu’s own ERNIE Bot.

Kunlunxin, originally an internal division of Baidu before becoming an independent entity in 2021, has established itself as a formidable player in the "cloud-to-edge" AI chip market. Its processors are designed to handle complex workloads ranging from search engine indexing to autonomous driving inference. Financially, the company is on an upward trajectory; while it recorded a net loss of around 200 million yuan in 2024 on revenues of 2 billion yuan, projections suggest it will surpass 3.5 billion yuan in revenue and achieve break-even status in 2025. This financial maturation makes it an attractive candidate for public markets, distinguishing it from early-stage startups that often burn cash without clear paths to profitability.

The timing of the potential listing coincides with a broader "deal surge" in China’s semiconductor industry, catalyzed by geopolitical tensions and robust state support. Recent market debuts, such as the explosive listing of GPU maker Moore Threads, have demonstrated aggressive investor appetite for Chinese chipmakers capable of replacing hardware from US giants like Nvidia. With the US tightening export controls on advanced semiconductors, domestic alternatives have seen their order books swell with demand from local tech giants and state-owned enterprises. This environment has created a unique window of opportunity for companies like Kunlunxin to secure high valuations and substantial public capital.

Strategically, the spin-off allows Baidu to unlock shareholder value that is currently obscured within its massive conglomerate structure. By listing Kunlunxin separately, Baidu can highlight the hidden value of its hardware assets while allowing the chip unit to pursue its own financing and strategic partnerships. However, the path to IPO is not without challenges; the company must navigate the volatile post-IPO performance seen by some peers and prove its technological competitiveness in a crowded domestic market. Nevertheless, the listing would solidify Kunlunxin's status as a pillar of China’s computing infrastructure, reinforcing the national mandate to build a self-reliant supply chain for the AI era.