To The Moon

Baidu’s September Bullish Catalysts

• Baidu Apollo is now top two globally in fully autonomous commercial vehicle deployment, with Q2 commercial ride orders up 148% YoY.

• The AI Cloud business boasts a full-stack solution from chip to application, with subscription AI revenue up 50% YoY in Q2.

• Baidu signed a major, multi-year AI cloud contract with China Merchants Group, according to industry estimates.

• Kunlun Chip 3.0 has reached mass production and scaled application, now partially replacing NVIDIA chips for Wenxin LLM training.

• Rumors are circulating that domestic tech firms are halting purchases of certain NVIDIA chip models, making Baidu—with its own Kunlun chips—a focal point.

Market Assessment

• The successful mass production of Kunlun 3.0 and the major AI cloud contract with China Merchants Group are two key bullish drivers.

• The China Merchants partnership adds significant upside to cloud growth for 2026–27.

• Kunlun’s ramp and progress in replacing NVIDIA chips showcases Baidu’s core tech edge.

• Current P/E is 17.5, well above the historical average of 10.9—raising the risk of a technical pullback.

• Despite strong catalysts, some uncertainty remains about Q3 revenue impact.

• Target price: $143—based on a 5x P/E for core search and a 4x P/S for AI cloud and autonomous driving.

Options Analysis

• For October, expected price range is $112–159.

• Key support at $120, resistance at $130–140.

• Sentiment is bullish: call/put ratio is 2.03, but implied volatility at 59.36% is at a yearly high.

• This reflects both AI/policy upside and market worries over potential volatility—be alert for surprise swings.

Trading Strategy

• With the market repricing $BIDU$ and limited downside, selling out-of-the-money puts is a constructive bullish play.

• If holding $BIDU$ shares, selling out-of-the-money covered calls is a way to generate yield during this phase.

Example Strikes & Expirations

• Covered Call: $BIDU 20250926 155.0 CALL$  (86% win rate)

• Sell Put: $BIDU 20250926 125.0 PUT$  (82% win rate)

Strategy Details:

• Covered Call: Hold 100 shares of $BIDU$ and sell 1 contract of the $BIDU 20250926 155.0 CALL$ . If $BIDU$ is below $155$ at expiry, you keep the shares and premium. If above, your shares are called away at $155$, but you still keep the premium.

• Sell Put: Sell the $BIDU 20250926 125.0 PUT$ ; if $BIDU$ stays above $125$ at expiry, you keep the premium. If it drops below, you’re assigned 100 shares at an effective cost of $125$ minus the premium received.