Alibaba's performance this year is in line with the Hang Seng Technology Index, with a cumulative decline of nearly 2%, but Baidu has dropped nearly 25%, far below the index performance. As a major shareholder of Ctrip, its market value has been surpassed by the latter, mainly due to Baidu's continuous lag in various aspects.
For example, in the first quarter of this year, advertising revenue only increased by 3% year-on-year, much lower than other internet companies. At the same time, in recent years, companies have been emphasizing increasing shareholder returns, but Baidu's return efforts are relatively poor. For example, in the first quarter, it repurchased $229 million, with an annualized rate of only 3%, and the company did not even pay dividends.
The low return effort is mainly due to the company's continuous investments in areas such as autonomous driving and AI. However, in recent years, there has been no visible growth from these investments, especially in the self-driving sector. The financial reports always only disclose order volumes. Although it was recently mentioned that there is hope to achieve a single-zone profit and loss balance by the end of the year, it is still difficult to bring anticipation to the market. Moreover, Tesla will launch Robotaxi on August 8th, and if FSD can enter China in the future, Robotaxi might do the same.
Furthermore, although Baidu has disclosed AI-related information, such as 11% of Baidu search results being generated by AI in the first quarter, and revenue from generative AI and basic models accounting for 6.9% of intelligent cloud business revenue, the core business revenue of Baidu only increased by 4% in the end. The increasing contribution of AI actually proves that it will not bring significant growth.
While there is no fantasy in new businesses, traditional search businesses are also facing challenges. On the one hand, users are increasingly using tools such as Douyin, Xiaohongshu, Zhihu, WeChat, etc., for search. On the other hand, the disruption of search engines by AI is also imminent.
Even if Baidu does well, it may only be able to maintain market share. It is difficult to replicate the story of Google and Meta increasing advertising revenue through AI. Ultimately, it has always failed to provide users with a good experience.
With years of investment without significant returns and low shareholder returns, it is not unreasonable for Baidu, once one of the three internet giants, to fall into negative territory

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Baidu continues to lag behind, with advertising revenue growth lower than other internet companies and low shareholder returns. Baidu has invested in autonomous driving and AI, but has not brought significant growth. New businesses face challenges as users turn to other tools for search, and AI may disrupt search engines. Baidu has failed to provide users with a good experience, leading to its stock price falling below net asset value

- Alibaba's performance this year has been relatively stable compared to the Hang Seng Tech Index, with a decline of nearly 2%. However, Baidu has experienced a significant drop of nearly 25%, underperforming the index. Baidu's underperformance can be attributed to various factors, such as its low advertising revenue growth of only 3% in the first quarter, which is much lower than other internet companies. Additionally, Baidu's shareholder returns have been relatively poor, with a buyback of $229 million in the first quarter, resulting in an annualized return of only 3% and no dividends. This low return is mainly due to continuous investments in areas like autonomous driving and AI, which have yet to show significant growth. Furthermore, Baidu's core search business is facing challenges as users increasingly turn to other platforms like Douyin, Xiaohongshu, Zhihu, and WeChat for search purposes. The disruption caused by AI in the search engine industry is also a potential threat. Despite Baidu's efforts in AI, its core business revenue only grew by 4%. The increasing contribution of AI indicates that it may not bring substantial growth. With limited prospects in new businesses and challenges in the traditional search business, Baidu's ability to maintain market share is uncertain. Its inability to replicate the success of Google and Meta in leveraging AI to boost advertising revenue can be attributed to the company's failure to provide a satisfactory user experience. Years of investment without significant returns and limited shareholder returns have contributed to Baidu's current undervaluation.

Hong Kong Stock Market Review: Baidu continues to lag behind