Nomura downgrades Baidu amid AI search competition

Investing.com -- Nomura downgraded Baidu (NASDAQ: BIDU) to "Neutral" from "Buy" and slashed its target price to $98 from $104 on intensifying competition in AI-powered search and the company’s weakening first-mover advantage.

The brokerage noted that major players such as Tencent, Alibaba (NYSE: BABA), and Bytedance, along with AI startups like DeepSeek, are increasingly gaining traction in AI search, posing a challenge to Baidu’s Ernie Bot. While Baidu remains a strong contender, Nomura warned that monetization hurdles and rivals' ad-free approach could hinder its efforts.

"The traditional bidding based search ad listings do not seem to fit well into AI search, which is supposed to serve its users just one result to the inquiry," analyst at Nomura said.

Nomura also lowered its revenue growth forecast for Baidu’s core advertising business to 0% for 2025, citing potential user migration to AI search. Meanwhile, AI cloud revenue growth was revised upward to 29% from 18%, driven by rising AI demand.

The brokerage said it prefers Alibaba, JD (NASDAQ: JD).com, and NetEase (NASDAQ: NTES) over Baidu.

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