Baidu's AI Chip Unit Kunlunxin Files for Landmark Hong Kong IPO as China Tech Push Intensifies

Chinese technology giant Baidu kicked off 2026 with a major strategic move, announcing that its AI semiconductor subsidiary Kunlunxin has confidentially filed for an initial public offering on the Hong Kong Stock Exchange. The listing could value the chip unit between $16 billion and $23 billion, according to analysts at Jefferies, making it one of the year's most significant technology offerings.

The Strategic Rationale

Baidu's decision to spin off Kunlunxin comes at a pivotal moment for China's technology sector. U.S. export restrictions have limited Chinese companies' access to advanced AI chips from Nvidia and other American suppliers, creating both challenges and opportunities for domestic chip makers.

"The spinoff aims to independently showcase Kunlunxin's value, attract investors focused on the AI chip sector, and leverage its standalone listing to enhance its market profile and broaden financing channels," Baidu stated in its filing announcement.

Baidu's Hong Kong-listed shares surged 9.4% on Friday to HK$143.80—their highest close since July 2023—as investors responded enthusiastically to the news. The company currently owns 59% of Kunlunxin and expects to retain majority ownership after the IPO.

From Internal Project to Chip Powerhouse

Kunlunxin's journey began in 2012 as an internal Baidu business unit focused on developing AI chips to power the company's own data centers and autonomous driving initiatives. Over the years, it evolved into an independently operated entity with growing external sales.

The unit's revenue exceeded 3.5 billion yuan (approximately $500 million) last year, achieving breakeven profitability—a significant milestone for a semiconductor company in growth mode. JPMorgan analysts forecast that Kunlunxin's chip sales will increase sixfold to 8 billion yuan in 2026, driven by surging demand for AI computing infrastructure.

"Kunlunxin represents the next generation of Chinese semiconductor companies—born out of necessity when U.S. restrictions tightened, but now positioned to capture a massive domestic market that has no choice but to look inward for solutions."

— Chen Wei, Senior Semiconductor Analyst at CICC

External Customers Drive Growth

What makes Kunlunxin's IPO particularly compelling is its evolution beyond being simply a captive supplier to Baidu. External customers now represent a growing share of revenue, with major contracts including more than 1 billion yuan in orders from suppliers to China Mobile, the country's largest telecommunications carrier.

This diversification reduces the risk that often plagues corporate spinoffs—over-dependence on a single customer. If Kunlunxin can continue winning business from China's major technology and telecommunications companies, its valuation could ultimately exceed analyst estimates.

Hong Kong's Tech IPO Boom Continues

Kunlunxin's filing adds to what's shaping up to be a robust year for Hong Kong IPOs. The city raised $36.5 billion from 114 new listings in 2025—its strongest year since 2021 and more than triple the $11.3 billion raised in 2024.

The Kunlunxin offering arrives alongside other significant Chinese semiconductor listings. AI chip designer Biren is set to debut after completing a $717 million Hong Kong IPO, signaling strong appetite for exposure to China's domestic chip industry.

For Hong Kong's exchange, these listings represent a strategic coup. The city has positioned itself as the premier venue for Chinese technology companies seeking public market capital, particularly as U.S.-China tensions make American listings more complicated.

The Competitive Landscape

Kunlunxin enters a market that's simultaneously constrained and full of opportunity. U.S. export controls have prevented Chinese companies from accessing Nvidia's most advanced AI processors, forcing them to either accept less powerful alternatives or develop indigenous solutions.

Major Chinese tech giants—including Alibaba, Tencent, and Huawei—have all invested heavily in custom chip development. Kunlunxin's advantage lies in its head start and proven ability to ship products at scale. The company's chips power AI applications ranging from natural language processing to computer vision, competing directly with domestic rivals like Cambricon and Horizon Robotics.

What the Valuation Implies

The $16 billion to $23 billion valuation range suggested by Jefferies would make Kunlunxin one of China's most valuable semiconductor companies. For context:

• SMIC, China's largest chipmaker, trades at roughly $40 billion market cap
• Cambricon, a rival AI chip designer, is valued at approximately $15 billion
• Horizon Robotics, backed by Intel, recently completed its own Hong Kong IPO at a $10 billion valuation

A successful Kunlunxin listing at the high end of estimates would instantly position it among the most valuable pure-play AI chip companies globally—a remarkable achievement for a unit that was still part of Baidu's internal operations just a few years ago.

Implications for Baidu

For Baidu, the spinoff accomplishes several strategic objectives. It crystallizes the value of an asset that may have been buried within the company's larger financial statements, potentially driving a rerating of Baidu's own stock as investors reassess the sum of its parts.

The company retains majority ownership, ensuring it continues to benefit from Kunlunxin's growth while gaining access to public market capital that can fund aggressive expansion. It's a playbook that other Chinese tech giants may follow as they seek to unlock value in their AI-focused subsidiaries.

Risks and Uncertainties

The IPO is not without risks. Geopolitical tensions could escalate, potentially complicating Kunlunxin's access to essential manufacturing equipment—much of which originates from U.S., Dutch, and Japanese suppliers subject to export controls.

Competition is also intensifying. Every major Chinese technology company recognizes the strategic importance of AI chips and is investing accordingly. Kunlunxin's current lead could narrow if rivals accelerate their development efforts or if new entrants emerge with superior technology.

Finally, the broader IPO market remains subject to volatility. While Hong Kong listings performed well in 2025, shifts in global risk appetite or renewed regulatory concerns could dampen demand for new offerings.

Looking Ahead

The Kunlunxin IPO prospectus, submitted on Thursday, did not yet include details on the size and structure of the offering. Investors will be watching closely for updates on pricing, timing, and the specific use of proceeds.

If successful, the listing will mark another milestone in China's quest for semiconductor self-sufficiency—and provide a template for how Chinese technology companies can spin off and monetize their AI investments. For global investors seeking exposure to China's AI ambitions, Kunlunxin may soon become one of the most direct ways to participate.