Baidu is in talks to raise money for a stand-alone artificial intelligence (AI) semiconductor company in a move to diversify its operations beyond advertising, CNBC has learnt. US-listed shares rose 2.3% in Thursday's pre-market session after closing 3.1% higher on Feb. 10.
According to CNBC, the chip company would be a subsidiary of the Chinese internet services company. Venture capital firms, GGV and IDG Capital, are already involved in early discussions to invest in the chip company where Baidu (BIDU) would be a majority shareholder, CNBC added.
Currently, the company has an in-house semiconductor unit to develop its Kunlun processor to process data for AI applications. However, a stand-alone semiconductor company could help the company commercialize its operations in a better way, according to the report.
One possibility cited by CNBC is that Baidu could sell the chips to customers across various industries, including automobile industries. Currently, automobile industries are facing a chip shortage that has impacted production. (See Baidu stock analysis on TipRanks)
This month, General Motors (GM) warned of a semiconductor shortage impacting its production lines this year and announced the temporary shutdowns at some of its production plants. Additionally, Ford (F) has estimated that a semiconductor shortage could impact 10% to 20% of its planned production in the first quarter of this year.
Following the news, Oppenheimer analyst Jason Helfstein reiterated a Buy rating and a price target of $305 on the stock. Helfstein said, “With the accelerating adoption of 5G, IoT, and AI (autonomous driving, smart speakers, robots, AR/VR, etc.), demand for AI chips is set to surge in the coming years.”
The analyst added, “We believe BIDU is well-positioned to capture this opportunity—BIDU can deploy its chips within its ecosystem (Baidu Cloud, Apollo autonomous driving, DuerOS smart speakers, etc.) and achieve fast product iteration, while other chip designers might have to rely on partners' products to achieve initial commercialization.”
The rest of the Street is bullish about the stock with a Strong Buy consensus rating. That’s based on 13 analysts recommending a Buy and 3 analysts suggesting a Hold. The average analyst price target of $244.13 implies 19.7% downside potential to current levels.
According to TipRanks Smart Score system, Baidu scores a 9 out of 10, indicating that the stock has a high likelihood of outperforming the market.
Related News:
iRobot Spikes 9% On 4Q Profit Beat; Street Says Hold
Cisco Drops 4.6% Pre-Market On Flat Sales Growth In 2Q
Lyft Sees Recovery Path After 4Q Sales Outperform; Shares Spike 13%
General Motors production has been hit hard by the semiconductor shortage. The automobile giant announced on Feb. 9 that it will need to extend the temporary downtime at its production plants in Kansas, Canada and Mexico until the the middle of March.
GM (GM) said, “GM’s plan is to leverage every available semiconductor to build and ship our most popular and in-demand products, including full-size trucks and SUVs and Corvettes for our customers.”
Shares of GM fell 1.4% to $56.06 at the close on Feb. 9.
Earlier this month, the company warned of a semiconductor shortage impacting its production lines this year and announced the temporary shutdowns at some of its production plants. Additionally, GM said that its Bupyeong 2 assembly plant in Korea will be operating at half of its capacity from Feb. 8. (See General Motors stock analysis on TipRanks)
Meanwhile, Ford (F) estimated that a semiconductor shortage could impact 10% to 20% of its planned production in the first quarter of this year.
Following the GM announcement, Barclays analyst Brian Johnson raised the stock's price target from $56 to $64 and reiterated a Buy rating.
Johnson believes that GM’s new business unit GM HydroTec for hydrogen fuel cells has "at least some potential," as it has also collaborates with Navistar International and Nikola (NKLA). The analyst argues that hydrogen fuel cells are likely be an important product for the medium and heavy-duty truck market.
The rest of the Street is bullish about the stock with a Strong Buy consensus rating. That’s based on 12 analysts recommending a Buy and 1 analyst suggesting a Hold. The average analyst price target of $58.08 implies 3.6% upside potential to current levels.
According to the TipRanks Smart Score system, GM scores a "Perfect 10" indicating that the stock has a high likelihood of outperforming the market.
Related News:
Cubic Inks $2.8B Buyout Deal With Veritas Capital, Evergreen; Shares Spike 10%
Palantir Partners With IBM To Provide AI-Driven Business Solutions
Hasbro Hits $1B In Online Sales In 2020 As Demand For Toys Booms