Barclays downgrades Baidu on ad pressure from generative AI

Barclays downgraded Baidu (BIDU) to Equal Weight from Overweight with a price target of $83, down from $115. The firm says the move to generative artificial intelligence exacerbates the pressure on Baidu’s advertising. Persistently declining ads revenue is also likely to drive the company’s margins lower, the analyst tells investors in a research note. While overall China advertising environment “is not robust by any means amid weak macro, Baidu is also faced with the classic innovator’s dilemma,” contends Barclays. As a leader in the generative AI in China and the leader in search, the company has been pushing aggressively into gen AI and now about 20% of its search queries return with gen AI results, which are monetized at lower rates than typical search, Barclays points out.