A general view of the Baidu logo is seen at the Shanghai New Expo Center during the World Artificial Intelligence Conference 2025 in Shanghai, China, on July 28, 2025.

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Chinese tech giant Baidu has announced plans to spin off its artificial intelligence chip subsidiary, Kunlunxin, and list it in Hong Kong, as more domestic chipmakers seek funds amid Beijing’s push for semiconductor self-sufficiency.

The company said in an announcement Friday that it had confidentially filed a listing application on the Hong Kong Stock Exchange, though details of the offering, including size and structure, remain undecided.

The move would still require regulatory approvals, including from China’s securities watchdog. Baidu emphasized there is no guarantee the spin-off will proceed. The company reportedly owns about 59% of Kunlunxin.

Baidu, a major player in China’s growing AI space, is both a buyer of specialized AI chips for data centers and cloud computing, as well as a designer of them through Kunlunxin.

The firm said that the spin-off would align with its strategy to highlight Kunlunxin’s standalone potential, attract sector-specific investors, and expand financing options. Kunlunxin would remain a Baidu subsidiary, it added.

The move comes against a backdrop of intensifying U.S.-China tech tensions. Both Washington and Beijing have imposed various restrictions on Chinese AI companies’ access to leading-edge AI chips from California-based Nvidia.

Meanwhile, Beijing has increasingly encouraged domestic chip purchases and mobilized billions in public funds towards development.

In recent months, several Chinese chipmakers have announced plans to list, including Moore Threads and Biren Technology.

A Growing Business Focus

Founded in 2012, Kunlunxin is central to Baidu’s ambition to become a “full stack” AI company, spanning hardware, servers and data centers, as well as AI models and applications.

While Baidu still relies heavily on Nvidia’s chips for AI computing power, Kunlunxin has enabled the company to increasingly use a mix of its self-developed chips in data centers running its Ernie AI models.

Kunlunxin has also shifted to operate as a separate entity, expanding its sales to third-party customers outside Baidu.

“In the market, Kunlunxin is seen as one of the most practical and widely used AI chips in China,” Brady Wang, associate director at Counterpoint Research, told CNBC.

He added that one of the chipmaker’s main strengths is in software. “Instead of forcing users to adopt a closed system, Kunlunxin works well with common AI frameworks and makes it easier to move workloads from [Nvidia].”

Reuters previously reported that Kunlunxin’s revenue is projected to exceed 3.5 billion yuan ($500 million) last year, reaching break-even. External sales were expected to account for more than half of its revenue in 2025, the report added. 

In another sign of strength last year, Kunlunxin won orders worth over 1 billion yuan from suppliers to China Mobile, one of the country’s biggest mobile carriers.

China Mobile also participated in the entity’s latest funding, which had raised over 2 billion yuan and valued the unit at about 21 billion yuan, according to Reuters.

In its announcement, Baidu said its plans to spin off and list Kunlunxin would better tie management incentives with performance and elevate the unit’s market presence.

Late last year, JPMorgan analysts forecast that Kunlunxin’s chip sales would increase sixfold to 8 billion Chinese yuan in 2026.

However, while Kunlunxin may help reduce China’s reliance on chips from Nvidia, it cannot fully replace them, Counterpoint’s Wang said, citing Beijing’s ongoing constraints in advanced chip manufacturing.

“[Kunlunxin’s chips] work best for inference and other workloads that are easier to move, especially for government, telecom, and state-owned cloud users, where stable supply and lower cost matter more than top performance,” he said.

“Because of this, Beijing is not relying on a single company. Instead, Kunlunxin works together with Huawei Ascend, Cambricon, Alibaba, and others to build a domestic AI computing ecosystem.”

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Baidu has launched a slew of AI applications after its Ernie chatbot received public approval.

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Chinese tech giant Baidu saw its shares in Hong Kong soar nearly 16% on Wednesday as it increasingly focuses on its artificial intelligence-related business that has also led to a ratings upgrade.

Shares in the Beijing-based firm, which holds a dominant position in China’s search engine market, had gained nearly 8% overnight in U.S. trading.

The strong stock performance came after equity research firm Arete Research Services lifted its rating on Baidu’s American depositary receipts to buy from sell, based on a positive outlook for its AI chip and cloud-computing revenue.

Baidu has been aggressively trying to grow AI-related chip and computing business, which supports its popular large language model and AI chatbot Ernie Bot. 

To train its AI models, the company has started using internally designed chips, The Information reported last week, citing people with direct knowledge of the matter.

According to researchers from Arete, Baidu’s growing chip venture has the potential to more than offset the impact from the company’s struggling online advertising business.

Baidu, whose Hong Kong shares have gained nearly 59% this year, reported a drop in second-quarter revenue last month as its core advertising business struggled and returns from AI investments remained limited.

In addition to providing a new potential business venture, Baidu’s chip drive could help it reduce reliance on AI chips from Nvidia, which has been subject to shifting export controls from Washington.

A week of AI moves

In other news this week, Baidu on Monday secured an AI-related deal with China Merchants Group, a major state-owned enterprise, focused on transportation, finance and property development. 

“Both sides plan to focus on applications of large language models, AI agents and ‘digital employees,’ vowing to make scalable and sustainable progress in industrial intelligence based on real-life business scenarios,” according to Baidu’s statement translated by CNBC.

As it seeks to gain an edge in China’s competitive AI space, the company also disclosed a 4.4 billion yuan ($56.2 million) offshore bond offering on Tuesday. This follows a $2 billion bond issuance back in March. 

Other Chinese AI players, such as Tencent, have also been raising funds, including via debt sales this year, to support the billions being invested into their AI capabilities. 

Meanwhile, at a developer conference last week, Baidu unveiled a series of AI advancements, including the company’s latest reasoning model, Ernie X 1.1.

According to the company, multiple benchmark results showed that its model’s overall performance surpassed that of Chinese AI start-up DeepSeek’s latest reasoning model. CNBC could not independently verify that claim.

Gimme Credit Senior Bond Analyst, Saurav Sen, said in a report last week that Baidu’s recent capital allocations have revealed that the company is making an “all-in AI pivot.”

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Tencent and Baidu, two of China’s largest technology companies, revealed how they’re keeping in the global artificial intelligence race even as the U.S. tightens some curbs on key semiconductors.

The business’ methods include stockpiling chips, making AI models more efficient and even using homegrown semiconductors.

While the administration of U.S. President Donald Trump scrapped one controversial Biden-era chip rule, it still tightened exports of some semiconductors from companies including Nvidia and AMD in April.

Big names in the sector addressed the issue during their latest earnings conference calls.

Martin Lau, president of Tencent — the operator of China’s biggest messaging app WeChat — said his company has a “pretty strong stockpile” of chips that it has previously purchased. He was referring to graphics processing units (GPUs), a type of semiconductor that has become the gold standard for training huge AI models.

These models require powerful computing power supplied by GPUs to process high volumes of data.

But, Lau said, contrary to American companies’ belief that GPU clusters need to expand to create more advanced AI, Tencent is able to achieve good training results with a smaller group of such chips.

“That actually sort of helped us to look at our existing inventory of high-end chips and say, we should have enough high-end chips to continue our training of models for a few more generations going forward,” Lau said.

Regarding inferencing — the process of actually carrying out an AI task rather than just training — Lau said Tencent is using “software optimization” to improve efficiency, in order to deploy the same amount of GPUs to execute a particular function.

Lau added the company is also looking into using smaller models that don’t require such large computing power. Tencent also said it can make use of custom-designed chips and semiconductors currently available in China.

“I think there are a lot of ways [in] which we can fulfill the expanding and growing inference needs, and we just need to sort of keep exploring these venues and spend probably more time on the software side, rather than just brute force buying GPUs,” Lau said.

Baidu’s approach

Baidu, China’s biggest search company, touted what it calls its “full-stack” capabilities — the combination of its cloud computing infrastructure, AI models and the actual applications based on those models, such as its ERNIE chatbot.

“Even without access to the most advanced chips, our unique full stack AI capabilities enable us to build strong applications and deliver meaningful value,” Dou Shen, president of Baidu’s AI cloud business, said on the company’s earnings call this week.

Baidu also touted software optimization and the ability to bring down the cost of running its models, because it owns much of the technology in that stack. Baidu management also spoke about efficiencies that allow it to get more out of the GPUs it possesses.

“With foundation models driving up the need for a massive computing power, the abilities to build and manage large scale GPU clusters and to utilize GPUs effectively has become key competitive advantages,” Shen said.

The Baidu executive also touted the progress made by domestic Chinese technology firms in AI semiconductors, a move he said would help mitigate the impact of U.S. chip curbs.

“Domestically developed self-sufficient chips, along with [an] increasingly efficient home-grown software stack, will jointly form a strong foundation for long-term innovation in China’s AI ecosystem,” Shen said.

China domestic chip focus

China has been ramping up development of chips designed and manufactured on its home soil for the last few years. Most experts agree that Beijing remains overall behind the U.S. in the realm of GPUs and AI chips, but there have been some advances.

Gaurav Gupta, an analyst covering semiconductors at Gartner, said stockpiling is one way Chinese companies are dealing with export restrictions. Additionally, there has been some progress made in semiconductor technology in China, even if it remains behind the U.S., Gupta added.

“China has also been developing its own domestic semiconductor ecosystem, all the way from materials to equipment to chips and packaging. Different segments have made varying levels of progress, but China has been surprisingly extremely consistent and ambitious in this goal, and one must admit that they have achieved decent success,” Gupta told CNBC by email.

“This provides an avenue for them to procure AI chips, which perhaps can’t compete with those from the U.S chip leaders but continue to make progress.”

Many U.S. executives have urged Washington to scrap export restrictions in light of China’s progress. Nvidia CEO Jensen Huang called the curbs a “failure” this week, saying they are doing more damage to American businesses than to China.

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