Goldman Sachs stated in its latest research report that Baidu's chip unit, Kunlun Chip, has officially submitted its Hong Kong listing application, marking a solid step for Baidu in unlocking the value of its assets. According to the report, on January 3, Goldman Sachs released its latest research suggesting that, based on its core calculations, if the market awards Kunlun Chip a valuation multiple similar to that of Cambricon (a 40x price-to-sales ratio), Baidu's 59% stake could be worth a staggering $22 billion, remarkably equivalent to 45% of Baidu's current total market capitalization. Even under a conservative valuation scenario, this represents significant potential upside. The spin-off listing of Kunlun Chip is a crucial step in unlocking its hidden value. Baidu has announced that Kunlun Chip submitted its listing application to the Hong Kong Stock Exchange on January 1, 2026. This spin-off will be executed through a global offering of Kunlun Chip shares, including a Hong Kong public offering and placements to institutional and professional investors. For investors, the most critical information lies in the changes to the ownership structure and control. Goldman Sachs points out that, as of August 2025, Baidu holds a 59% controlling stake in Kunlun Chip. Following the proposed spin-off, Baidu expects Kunlun Chip to continue as its subsidiary. This means Baidu can both release Kunlun Chip's market value through an independent listing and maintain control over this core computing infrastructure within its ecosystem. Sales are experiencing robust growth, with revenue projected to reach 6.5 billion yuan in 2026. Based on Reuters reports and its own estimates, Goldman Sachs detailed Kunlun Chip's financial growth trajectory, which is exceptionally strong: 2025 Sales: Estimated to reach approximately 3.5 billion yuan. 2026 Sales (Forecast): Driven by strong growth in new products and orders, projected to climb to 6.5 billion yuan. Goldman Sachs analyzed the revenue composition, noting that currently, the primary sales and usage of Kunlun Chip occur through Baidu's AI cloud infrastructure. While external sales were not significant by the end of 2025, they are expected to expand rapidly in 2026. External Sales Proportion: Goldman Sachs predicts that entering 2026, Kunlun Chip's external sales will grow swiftly, accounting for 14% of total cloud sales. Business Structure Optimization: Combined with more recurring and higher-value-added subscription businesses (estimated by Goldman Sachs to be close to 30% of cloud revenue), this means that by 2026, such high-quality revenue will constitute 43% of Baidu Cloud's total revenue. Kunlun Chip is not merely a contributor to sales figures; it is a critical component in Baidu's vertically integrated, full-stack AI cloud capabilities—spanning chips, the deep learning framework PaddlePaddle, the Qianfan MaaS platform/base models, and the application layer—forming an efficient feedback loop. Valuation Benchmarking: If Compared to Cambricon, the Valuation Upside is Substantial. This is the most exciting part of the report for investors. By comparing it to industry peers, Goldman Sachs highlights the "option value" not fully priced into Baidu's current stock price. Peer Comparison Data: Cambricon and Moore Thread: According to Goldman Sachs estimates and Reuters consensus, these peer companies trade at approximately 40x to over 100x their estimated 2026 sales (P/S ratio). Biren Technology: The newly listed Biren Technology in Hong Kong currently holds a post-listing valuation of HK$80 billion. Kunlun Chip's Scale: Goldman Sachs notes that, based on its estimates, entering 2026, Kunlun Chip's sales will be significantly larger than those of Moore Thread and Biren Technology, though still trailing behind Cambricon. Sensitivity Analysis of the Valuation of Baidu's Stake: Conservative/Baseline Range (5x-20x P/S): Applying a 5x P/S ratio (the target multiple for Baidu Cloud in Goldman's SOTP model) to a 20x P/S ratio (similar to Cambricon's trading multiple based on its 2027 expected sales as of end-2025), the valuation range for 100% of Kunlun Chip's equity is $5 billion to $18 billion. The corresponding value of Baidu's 59% stake would be: $3 billion to $10.6 billion. This equates to 6% to 23% of Baidu's current market capitalization. Optimistic/Benchmark Range (40x P/S): Applying a 40x 2026 P/S ratio (similar to Cambricon's current 2026 multiple) would significantly boost Kunlun Chip's implied valuation. In this scenario, the value of Baidu's 59% stake would reach $22 billion. This is equivalent to 45% of Baidu's latest market capitalization. Investment Implications and Subsequent Catalysts. Goldman Sachs maintains its "Buy" rating on Baidu with a Sum-of-the-Parts (SOTP) target price of $155 (HKD $151 for the Hong Kong shares). Goldman Sachs believes Baidu is transitioning from its traditional advertising/search business towards non-search businesses, which are being accelerated by AI and are expected to account for over 50% of Baidu Core revenue by 2027. For Baidu's cloud business, Goldman Sachs applies a 5x 2026 EV/Sales multiple in its valuation model, noting that GPU-based subscription businesses offer higher margins and greater recurring revenue compared to traditional project-based CPU cloud services. Investors should closely monitor the following four catalysts going forward: Announcements regarding new orders/product upgrades for Kunlun Chip and progress on the spin-off listing, which will further clarify the asset value of this subsidiary. Updates on the revised shareholder return policy in the first quarter of 2026. Announcement of specific steps to unlock asset value, based on recent investor meetings. Progress on the conversion to a primary listing in Hong Kong and the inclusion in the Southbound Stock Connect scheme.
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