Baidu (NASDAQ:BIDU), the biggest search engine in China, funnels the information it collects into AI algorithms. That data is processed by its Big Data Lab division, which was founded three years ago to improve Baidu's machine learning algorithms, analytics, and core search technologies. Baidu now places all these AI assets under its "Baidu Brain" division.

Baidu Brain has launched the virtual assistant Duer, invested in electric and autonomous carmakers, and introduced Apollo, an open-source software platform for driverless cars. It acquired home automation start-up RavenTech, opened up Duer's APIs to various hardware makers, and opened labs in Silicon Valley to deepen its ties with other companies in the AI and autonomous driving markets. It's also building a state-backed engineering laboratory for deep learning technologies in China.

A digital brain replacing a human head.

Image source: Getty Images.

Baidu is investing in AI to expand its digital ecosystem as the growth of its core advertising business slows down. It also complements its growth in online-to-offline (O2O) applications like ride-hailing, deliveries, and mobile payments, which all widen its moat against Tencent's (NASDAQOTH:TCEHY) WeChat, the most popular messaging app in China.

previously discussed how these efforts could strengthen Baidu's core business. But today, I'll focus on three big companies Baidu is partnering with, and how they could all benefit from the search giant's growing interest in the AI market.

NVIDIA

Chipmaker NVIDIA (NASDAQ:NVDA) is partnered with Baidu in autonomous driving, cloud computing, home automation, and AI research. Baidu's driverless cars will use NVIDIA's Drive PX autonomous driving platform, its Baidu Cloud data centers will be powered by NVIDIA's new Volta GPUs, and Baidu will add DuerOS to NVIDIA's Shield devices -- which the chipmaker hopes to turn into hubs for smart home devices.

As for AI research, the two companies will work together to optimize Baidu's PaddlePaddle open source deep learning framework for NVIDIA Volta, with the aim of making it more accessible for researchers and academic institutions. These partnerships should strengthen NVIDIA's automotive and data center businesses, which generated a quarter of its revenue last quarter. The growth of those businesses could offset the weight of its core gaming GPU business, which faces fresh challenges from AMD's (NASDAQ:AMD) new GPUs.

NVIDIA's "Roborace" vehicle.

Image source: NVIDIA.

AMD

Speaking of AMD, NVIDIA's rival also recently secured a deal with Baidu to install its Radeon Instinct GPUs in some of its data centers. In the press release announcing the deal, AMD claimed that it was "the only company with the capability to deliver both the high-performance GPUs and CPUs required to power the next generation of cloud data centers."

That move was clearly aimed at countering its two biggest rivals, Intel (NASDAQ:INTC) and NVIDIA, at the same time. Intel has a near monopoly on the data center CPU market with its Xeon CPUs, but it doesn't offer a viable GPU to meet the demands of modern machine learning tasks -- and GPUs generally process those tasks faster than CPUs. NVIDIA offers top-tier GPUs for those tasks, but they still need to be paired with Intel's CPUs.

This leaves both chipmakers vulnerable to AMD, which sells both CPUs and GPUs at lower prices. Many big tech companies, including Microsoft (NASDAQ:MSFT), have already agreed to use AMD's new server chips since they could significantly reduce data center operating costs. That shift would boost the growth of AMD's core Computing and Graphics business, which accounted for 54% of its revenues last quarter.

Microsoft

In July, Microsoft and dozens of other companies joined Baidu's Apollo alliance for autonomous cars. Microsoft will tether Apollo vehicles to its Azure cloud platform in markets outside of China, while the Baidu Cloud will track vehicles within China.

This agreement gives Microsoft a stronger foothold in the autonomous vehicle market, which is often associated with Google's self-driving cars. Baidu is also partnered with HERE Maps, the mapping platform now owned by a consortium of German automakers, in overseas markets.

Therefore, the combination of Apollo, Azure, and HERE could significantly widen Microsoft's moat against Google in the driverless race. It would also strengthen Microsoft's cloud business -- which is on track to generate $20 billion in annual revenues (nearly a fifth of its expected sales) next year.

And the list will keep growing...

China is a massive market for AI-powered devices and autonomous cars, and the clearest path into the country is by working with its leader in AI. Therefore, Baidu will likely keep securing new partnerships with other tech companies and automakers, which should lead to win-win deals across the market.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Leo Sun owns shares of Baidu. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Baidu, and Nvidia. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.