Baidu has submitted a confidential filing to the Hong Kong Stock Exchange for an initial public offering of its in-house AI chip design subsidiary, Kunlunxin. The company will retain a 59% ownership stake and intends for the standalone listing to highlight Kunlunxin’s growth trajectory and broaden its financing options. In its most recent funding round, Kunlunxin was valued at approximately 21 billion yuan (roughly $3 billion) and secured over 1 billion yuan in orders from strategic partners such as China Mobile. Last year, the unit generated more than 500 million dollars in revenue and reached breakeven, with external customers contributing over half of its sales.

On the day of the listing announcement, Baidu shares jumped by double-digit percentages, marking the largest single-day gain since early 2023. Options volume surged to more than nine times its daily average, led by calls targeting the January 2026 135-strike. Jefferies swiftly raised its price target by 14%, citing the spin-off as a catalyst for re-rating the conglomerate. Institutional interest has also increased, with major asset managers adding to their positions based on the belief that a sum-of-the-parts valuation will better reflect the standalone potential of the AI chip unit.

Despite a recent sequential decline in digital advertising revenue, Baidu’s full-year results showed 18 billion dollars in topline sales and net income of 3.26 billion dollars, translating into a net margin of 6.7%. Return on equity stood at 6.5% and return on assets at 4.1%. Management has committed to reinvesting in AI-driven services—ranging from cloud infrastructure to autonomous driving platforms—while tightening cost controls in legacy segments. Analysts at JPMorgan project Kunlunxin’s chip sales could grow sixfold to 8 billion yuan by the end of next year, underscoring the strategic importance of the spinoff to Baidu’s broader AI roadmap.