Could Baidu Stock (BIDU) Become the Next Google Stock?

BIDU Stock is a Dark HorseBIDU Stock is a Dark Horse

Baidu Inc (ADR) (NASDAQ:BIDU) stock is one of the best ways for retail investors to bet on the Chinese economy, but it’s important to know that this isn’t an average technology firm; Baidu stock is the Google (Alphabet Inc) (NASDAQ:GOOG) of China.

I’m not just talking about Baidu’s dominance of search-engine traffic in China, or the company’s habit of expanding into cool new technologies. Those comparisons are obvious enough, which is why plenty of people have made them before.

What caught my eye is far more specific. Somewhere deep within the bowels of Baidu’s “Institute of Deep Learning,” the company has built artificial intelligence software that could leave Google, Microsoft Corporation (NASDAQ:MSFT) and, Inc. (NASDAQ:AMZN) eating its dust.

We already know that artificial intelligence (AI) is the next “big thing” in tech stocks. It feeds into every single product you can imagine, from driverless cars to voice-recognition software. Whichever company wins the race for perfect AI is going to guarantee a surge in their stock price.

And Baidu stock just became a serious contender. Let me explain.

The MIT Technology Review listed BIDU stock as No. 2 on its 2016 list of 50 smartest companies. (Source: “Powerful speech technology from China’s leading Internet company makes it much easier to use a smartphone,” MIT Technology Review, last accessed August 26, 2016.)

In their report, the folks at MIT specifically cite Baidu’s work on AI as “impressive” and capable of “stunning accuracy”. I know it sounds boring and technical, but this kind of research could help Baidu stock in two different ways.

Two Reasons to be Bullish on Baidu Stock

For one thing, Baidu’s research gives the company standout voice-recognition software. Most analysts, myself included, think this is important because people will eventually talk to their smartphones more than they’ll look, type, and tap on them.

“I see speech approaching a point where it could become so reliable that you can just use it and not even think about it,” says Andrew Ng, Baidu’s chief scientist, who is also an associate professor at Stanford University. “The best technology is often invisible, and as speech recognition becomes more reliable, I hope it will disappear into the background.”

Baidu is much closer to making that a reality than people realize. In China, teenagers are already starting to voice their search queries and dictate their text messages. They’re able to do all these things because Baidu’s software doesn’t make as many mistakes as other voice-recognition products on the market (I’m looking at you, “Siri!”).

In fact, a team of researchers found that Baidu could transcribe Mandarin better than human typists. Think about it: there are over one billion people in China that Baidu can use to hone the efficiency of its voice-recognition software.

Once the technology is perfected, it can be used to control almost every household item. “In the future, I would love for us to be able to talk to all of our devices and have them understand us,” Ng says.

Industry insiders call this the “Internet of Things.” There’s a rush to add Wi-Fi connectivity to regular household items so we can control them with our voices. Experts say the industry could be worth $300.0 billion by 2020, so BIDU stock could soar as the company takes a lead in this market.

The second benefit of AI software is driverless technology. China already has a pilot program for autonomous cars and buses in one of its cities, but that’s only the beginning.

Unlike Google, Baidu is marketing its driverless technology for mass transportation à la vans and buses. China has a pollution problem, so this is a sound strategy, and it would mean that Baidu could sell to companies instead of people.

I love that idea, because customer loyalty can be fickle, but companies make longer-term decisions.