Is Baidu Inc (ADR) (NASDAQ:BIDU) A Reliable Growth Investment?

October 02, 2017, 10:42 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Baidu Inc (ADR) (NASDAQ:BIDU) is a major web services company mainly serving the Chinese market where it is headquartered. Baidu has reported weak growth in its main search business over the past two years, but the recent implementation of AI-search algorithms has resulted in the significant growth of its core search business.

The company’s Q2 report indicated that monthly active users on its web platforms were back above 100 million, which was a gain of about 20% from the April figure. The volume of content shared on its platforms also hit new highs, as did the number of online active customers, which exceeded 471,000.

The above metrics indicate that after two sluggish years, Baidu’s core businesses are back on track as they have posted significant growth, according to the latest quarterly report. However, the company’s future growth potential will be driven by its investments in AI even as it seeks to develop driverless cars.

Analysts estimate that the development of driverless technology will add approximately $120 billion to Baidu’s overall revenues. However, this is a highly competitive industry given the stiff competition that Baidu faces from Alphabet Inc (NASDAQ:GOOGL) Waymo project.

Baidu has an advantage over its competitors in the Chinese and Asian markets given its large footprint in the region. Baidu has also developed AI products that cater to the needs of the Chinese and Asian markets.

The company has collaborated with other Asian automakers such as Hyundai to develop AI technology for its driverless cars that will be launched in 2021. However, before the launch, Baidu will continue selling various AI technologies such as its car map software MapAuto to many of its partners.

The company is also set to generate revenues from car-sharing, bicycles and other IoT technologies, which could amount to over $100 billion in the near future. The company’s investments in AI and other technologies are likely to bear fruit for its investors now and into the future.

Other technology companies have also taken the plunge into developing driverless car technologies, which positions them in direct competition with Baidu. Therefore, the question remains whether Baidu is a good long-term investment for the growth investor.

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