Morningstar: Baidu's AI business is expected to provide long-term growth potential, and the company's stock is undervalued.

Morningstar analyst Kai Wang reported that Baidu's AI cloud business is expected to provide the company with long-term growth potential. He predicts that driven by the strength of its cloud infrastructure, fourth quarter AI cloud business revenue is expected to grow by more than 20% year-on-year. He added, "Baidu has demonstrated its ability as a large-scale cloud service provider, and we believe investors may be overlooking its long-term growth potential." Despite facing increasingly fierce competition in AI-driven businesses such as autonomous taxis and language models, Baidu is in a favorable position due to its capital resources, massive data, and research and development investment. Morningstar maintains a fair value estimate of $146 for its ADR and points out that the company's stock is undervalued in the context of economic recovery and the potential rebound of the advertising business sector.