Baidu Just Gained Shanghai and Shenzhen Stock Connect Access. Is It Now a Better AI Bet Than Alibaba?

Baidu recently gained access to the Shanghai and Shenzhen Stock Connect programs, allowing Hong Kong Class A share holders to trade on the Shanghai and Shenzhen exchanges starting September 7. This move is expected to increase liquidity and the shareholder base for Baidu. However, this new access does not change Baidu's position in the competitive AI market, which is dominated by Alibaba Group Holding Limited.

Both companies are pursuing AI through different strategies involving models, cloud services, chips, and consumer distribution. Baidu's strategy centers on search traffic, its Ernie ecosystem, cloud services, and Kunlunxin chips. The potential benefits of Stock Connect for Baidu could enhance its access and trading, but it's uncertain whether this will improve earnings directly.

Baidu currently has a higher short-interest settlement compared to Alibaba, suggesting a certain level of skepticism among investors. While Baidu's enhanced liquidity could be a positive factor, the ultimate decision on which company is the better investment should be based on revenue growth, margins, AI customer adoption, and other strategic factors.

Investors should also bear in mind that Baidu's U.S. depositary shares and Hong Kong ordinary shares are linked but not identical. The Stock Connect program may narrow Baidu's accessibility discount, but it's not guaranteed to drive demand for the Nasdaq listing. The impact of Stock Connect on Baidu's stock will be seen through cross-market volume rather than immediate earnings.

Despite the potential benefits, the article suggests that other AI stocks may offer greater upside potential and less downside risk.