Baidu is emerging as a major AI chip player in China to fill the Nvidia gap

Tech elephantine Baidu is emerging arsenic 1 of China's cardinal artificial quality spot players, positioning itself arsenic a challenger to Huawei arsenic some look to capable the void near by manufacture person Nvidia being kept retired of the country.

Best-known arsenic China's biggest hunt business, Baidu has successful caller years refocused its concern astir driverless cars and AI, including a majority-owned subsidiary, Kunlunxin, which designs chips.

Several analysts person upgraded their outlook connected Baidu's banal implicit the past fewer weeks, citing the semiconductor concern and forecasting the portion volition summation much home orders.

This month, Baidu laid retired a five-year roadmap for its Kunlun AI chips, opening with the M100 successful 2026 and the M300 in 2027. The institution already uses a premix of its self-developed chips successful its information centers to tally its ERNIE AI models, arsenic good arsenic Nvidia products.

Baidu makes wealth by selling its chips to 3rd parties gathering information centers arsenic good arsenic renting retired computing capableness via its cloud. It has sought to presumption itself arsenic a alleged "full stack" AI offering with infrastructure made up of chips, servers and information centers, arsenic good arsenic AI models and applications.

And the spot concern appears to beryllium gaining traction. Earlier this year, Kunlunxin won orders from suppliers to China Mobile, 1 of the country's biggest mobile carriers.

"Kunlunxin has emerged arsenic a starring home AI spot developer, focusing connected high- show AI chips for ample connection exemplary (LLM) grooming and inference, unreality  computing, and telecom and endeavor workloads," analysts astatine Deutsche Bank said successful a enactment this month.

While Nvidia's graphics processing units (GPUs) are wide regarded arsenic the astir precocious chips for grooming and moving AI, the institution has been blocked by the U.S. authorities from selling its top-end merchandise to China. Beijing has besides reportedly been persuading section tech companies not to bargain the H20, a little almighty Nvidia spot designed for the Chinese marketplace and greenlit for export.

With Huawei — the starring subordinate done its massive clusters of chips — retired of the picture, analysts are suggesting Baidu volition capable the void and its spot concern is acceptable for explosive growth.

"We judge home request for AI compute successful China remains intense, and hyperscalers are progressively sourcing from section solution providers," JPMorgan said successful a enactment connected Sunday. "We view Kunlun AI spot arsenic 1 of the champion positioned."

The concern slope analysts forecast Baidu chips income to summation six-fold to scope 8 cardinal Chinese yuan ($1.1 billion) successful 2026.

Analysts astatine Macquarie estimation that Baidu's Kunlun spot portion could beryllium valued astatine astir $28 billion.

Baidu is not unsocial among China's tech giants erstwhile it comes to self-developed semiconductors. CNBC reported successful August that Alibaba is besides processing its next-generation AI chip.

Baidu's spot propulsion comes arsenic Chinese tech giants this period said they're seeing proviso shortages.

Eddie Wu, CEO of Alibab, said that "the proviso broadside is going to beryllium a comparatively ample bottleneck" implicit the adjacent two-to-three years, referring to components and chips required to physique information centers.

Tencent said this period that its 2025 superior expenditure would beryllium little than initially anticipated. But Tencent President Martin Lau said this this was not due to the fact that of a deficiency of demand, but much a shortage of disposable chips to walk the wealth on.

"It is not a reflection of our alteration successful AI strategy ... It is so a alteration successful presumption of the AI spot availability," Lau said.

Part of this shortage has been driven by planetary request and resulting bottlenecks successful the semiconductor proviso chain. But China's effective artifact of Nvidia chips has besides reduced the supply.

Chinese tech firms person tried to mitigate the shortage by using stockpiled chips, arsenic good arsenic trying to marque their AI models much businesslike to bash much with the semiconductors they have.

Meanwhile, China has its ain challenges with manufacturing due to the fact that its biggest chipmaker SMIC, is unable to compete connected the standard and exertion with leaders similar Taiwan Semiconductor Manufacturing Co. That makes it hard for the China to manufacture capable home chips to capable the shortfall.

Like their U.S. counterparts, Chinese tech companies person continually reported beardown request for AI.

"We spot that lawsuit request for AI is and remains precise strong. In fact, we are not adjacent capable to support gait with the maturation successful lawsuit request … successful presumption of the gait astatine which we tin deploy caller servers," Alibaba's Wu said this week.

That gives Baidu an accidental successful China.

"Baidu's spot propulsion is some a necessity and an opportunity. It's a necessity, due to the fact that Chinese platforms tin nary longer presume a dependable fare of US GPUs; opportunity, due to the fact that there's present a semi‑captive, multi‑billion‑dollar home marketplace for AI hardware that is compliant with some US export rules and Beijing's self‑reliance agenda," Nick Patience, signifier pb for AI astatine The Futurum Group, told CNBC.

"If Baidu tin vessel competitory Kunlun generations connected time, it doesn't conscionable lick its ain proviso occupation — it becomes a strategical supplier to the remainder of China's AI industry."