As a trade war with China escalates, Baidu Inc. (BIDU) stands out as an opportunity to gain exposure to a global leader in AI at a compelling valuation, with minimal risks from tariffs. As China's leading search engine, BIDU has evolved into a powerhouse in AI innovation, with initiatives like the Ernie Bot chatbot, Baidu AI Cloud, and autonomous driving projects gaining significant traction. These efforts position BIDU to capitalize on China's aggressive push to compete globally in AI, supported by recent deregulation that is unlocking value for Chinese tech firms. BIDU's AI Cloud reported 26% growth in Q4 2024, and its venture capital fund for AI startups emphasizes its commitment to leading this space. Trading at a significant discount to its industry, BIDU offers an attractive risk to reward for investors seeking exposure to the AI revolution with a long-term growth horizon. Using the chart If we examine the chart, BIDU made a new 52-week low at the beginning of 2025 which started to show exhaustion from sellers. Since then, the stock has made a series of higher highs and higher lows, suggesting that the multi-year downtrend is potentially starting to reverse in the other direction. Lastly, the recent pullback to its $84 support level provides an attractive risk to reward entry point in this directional shift with an upside target of $150. Looking at the business, BIDU trades at a significant discount to its industry, despite EPS growth and profitability metrics that are in line with or exceed industry averages. China's deregulatory push and BIDU's leadership in AI further enhance its investment case. Forward PE Ratio: 8.51x vs. Industry Average 20.89x Expected EPS Growth: 12.85% vs. Industry Average 14.43% Net Margins: 17.88% vs. Industry Average 7.89% BIDU's AI Leadership: AI Leadership: BIDU's AI initiatives, including the Ernie (handling 1.65 billion API daily requests last quarter), Baidu AI Cloud (26% growth in Q4 2024), and Baidu Apollo (leader in smart transportation), position it at the forefront of China's AI ambitions. Deregulatory Tailwinds: China's recent relaxation of tech regulations is unlocking value for BIDU, allowing it to focus on innovation and growth. Investment in AI Ecosystem: BIDU's $145M venture capital fund for AI startups and up to $2B investment in biotech highlights its commitment to expanding its AI and tech footprint. The trade To capitalize on BIDU's long-term growth potential, I'm suggesting that we use a cash secured put to generate income as a stock acquisition strategy. This entails selling the Apr 4, $85 Put @ $3.20 Credit. This strategy involves selling the April 4, 2025 $85 put, collecting $320 in premium per contract. The maximum reward is $320 if BIDU is above $85 at expiration. This strategy carries the obligation to purchase 100 shares at a net price of $81.80 if BIDU closes below $85 at expiration, offering a 3.91% discount to the current price. View this Trade with Updated Prices at OptionsPlay This strategy positions you to potentially acquire BIDU shares at a discounted price for a long-term play, while collecting premium income if the stock remains above $85. With BIDU's robust AI exposure, technical breakout, and undervalued fundamentals, this cash-secured put offers a strategic way to gain exposure to a leader in China's AI revolution with lower risk using options. (Clarification: Article was updated to give the most recent quarterly figure for Ernie API requests.) DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
