Please ensure Javascript is enabled for purposes of website accessibility

Why Baidu Stock Soared Today

By Joe Tenebruso - Feb 19, 2021 at 9:58PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

China's internet search leader wants to become a player in the booming EV market.

What happened

Shares of Baidu (BIDU 2.13%) surged 14% on Friday after the Chinese technology titan reportedly chose a well-regarded CEO for its new electric vehicle joint venture.

So what

Baidu announced in January its intention to create a new electric vehicle company. As part of that plan, Baidu entered into a strategic partnership with leading Chinese automaker Zhejiang Geely Holding Group. Baidu will contribute its autonomous driving technology to the venture, while Geely will share its design and manufacturing expertise. 

"At Baidu, we have long believed in the future of intelligent driving and have over the past decade invested heavily in AI to build a portfolio of world-class self-driving services," Baidu CEO Robin Li said in a press release announcing the collaboration. "China has become the world's largest market for EVs, and we are seeing EV consumers demanding next-generation vehicles to be more intelligent." 

A person is pointing to an upwardly sloping digital chart.

Baidu's stock price rose sharply on Friday. Image source: Getty Images.

On Thursday, Reuters and CNBC reported that Baidu will name Xia Yiping as CEO of its EV partnership with Geely. Yiping co-founded popular bike-sharing company Mobike. He also has auto industry experience from his time at Ford and Fiat Chrysler.

Now what

Although investors are understandably excited about the potential of Baidu's opportunity in the fast-growing electric vehicle market, they may want to temper their near-term expectations. Li said during a conference call with analysts that it will likely be at least three years before Baidu launches its first EV. 

Still, the initiative could help diversify Baidu's revenue at a time when its core internet search business has come under pressure from rivals. If Baidu and Geely can begin to take share in the EV market in the coming decade, both companies will get a powerful long-term growth driver.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Baidu, Inc. Stock Quote
Baidu, Inc.
BIDU
$139.09 (2.13%) $2.90

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.