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00:00Why make Hong Kong that dual primary listing now and does it change anything for the company
00:04financially? Yes, thank you so much. So obviously every company will mention it will diversify the
00:09client and the investor basis but I think it is good timing that signal Baidu has moving to the
00:16second growth curve and our early investment into AI from both cloud application chip and all the
00:22agents has become important revenue streams. I think it is the most important timing for Baidu
00:26to show both the Hong Kong stock market but also the mainland investors that there will be a great
00:32opportunity to have this access to a unique four-stack AI capability company in Hong Kong
00:37market. Do you see any sort of liquidity changes that could happen post-conversion at all? So I
00:43think it's really happy we are converting to primary listing Hong Kong today and hopefully the stock
00:49connect can be effective have a new net in funding cash flows for example for next week and I think
00:56based on some of the sales analyst's comments I think there will be additional 10 to 15 percent of
01:01additional fund flows into the stock like the market cap like us and we are actually receiving
01:10increasing increase from mainland China investors asking about the recent business and especially
01:15they want to have more understanding about how the status of listing Hong Kong can be more closer to
01:21both the clients suppliers and friends in mainland China as well. I think the increase and interest
01:26definitely increasing quite a lot. Yeah I mean the potential for those southbound flows to really
01:29come buy up the stock. Do you have a realistic timeline of when it could be included in the stock
01:34connect? Yeah so obviously it depends on the final judgment on exchange but based on the previous
01:40patterns I think the southbound connect will be effective in the next few days or about a week of
01:46time and hopefully the next window will be in early September and I think based on today's the plan
01:54I think we will qualify for most of the criteria so I think the effectiveness of the addition to the
02:01stock net will be very soon. Okay and what do you think those million investors once that does happen
02:05what is going to be the Baidu story that you know you talk about unlocking the potential of the whole
02:10AI
02:10full stack where is Baidu now in that whole evolution? Yeah a few data I actually want to share
02:16I think in the past two three quarters our new AI revenue actually have more than 50 percent of the
02:24total revenue shares and the second data point is I think our AI cloud become a second growth curve and
02:31the
02:31last few quarters we have been delivered a higher the industry average of the top line growth and for
02:37this quarter our GPU cloud revenue has increasing more than 280 percent I think these are part of the
02:43new growing stories of how we put early investment into work and the second view I just want to also
02:49share is
02:49in the past few quarters I think the AI application and end demand of how drive AI to help our
02:56customer
02:56deliver increasing productivity has seen real value so that's why the entire ROI and the payback period
03:03of all the AI investment actually become shorter so for us we're actually seeing better IOI smarter way
03:08of spending money and strong demand from clients I think these are the few buckets actually helping us
03:14deliver more sustainable growth on the top line on the AI investment and the revenue growth but also on
03:19the other end I think the full stack of capability increase including for example from chip to cloud to
03:25deploy the AI infrastructures and we have our model which linking to our applications which including
03:30both agents and also the physical AI which including our robot taxes as well I think this full stack of
03:36the unique assets value and linking the assets to be become more valuable to the end users is very
03:42unique story for Baidu in today's AI technology world Henry hi Henry this is David sorry I couldn't
03:52be there I just wanted to just ask you one or two questions if you don't mind I mean it's
03:58as you laid
03:59out it's clearly a good story maybe markets are just not patient enough not to lean on the negatives here
04:08but the markets seem to be missing something with your story I'm sure you know where the stock price is
04:12and where that's trading what what what gives I guess the question is what do you think is the most
04:18important indicator that you think investors should be watching so they get a better a more accurate
04:24sense of yours or your AI story yeah thank you David so we also noticed that obviously we are working
04:32on a few important projects I think we just want to deliver a good and better fundamentals of the company
04:39earnings but also we have more catalysts to come down the road including the prime listing today and also
04:45the potential spin-off of our important subsidies on the trip assets and we may also as planned and
04:52promised we'll pay the dividend by end of this year to the shareholders well I think these are full
04:56package of the both fundamentals and the catalyst as well but also to your point we also noticed that
05:02we are in the important transition period actually moving from the traditional search revenues to the new
05:08AI revenues I think what is missing today I think it is good time and I just want to clarify
05:13a little bit
05:13because I think the investors we are looking to a new AI growth of the story on the other on
05:20the side but
05:21also the traditional legacy business on the AI on the traditional search we need to do a better way of
05:27monetize and stabilize the business as well but I think the most missing part is the IOI in the AI
05:34new
05:35growth curve will deliver better IOI and maybe in the near term as equivalent in terms of the profit margin
05:42and the payback equivalent to the traditional search I think this is a point actually in the market has
05:47not noticed that because there is still kind of mentality in the way that you know AI may be a
05:53heavy capbacks and maybe the end customer will be concentrated there will be a lot of project-based
05:57revenue but my point is if you're receiving and looking at the new trends in the past probably a few
06:03months you know the grossing the increasing token consumptions the more diversified client base and
06:11the stronger backlogs which multi-year of committed with the prepayments of the revenue to Baidu as
06:19well as a very strong demand of our chip business if you're putting all the things together my view is
06:24in the near term the profits of the AI will be in the equivalent of the margin especially the growth
06:32margin compared with the traditional search number one and number two the cash payback will be much
06:38shorter than market expected and number three the continue the the the kind of more sustainability of
06:45the revenue will be there because the AI application is now unlocking the AI foundation model capability going
06:52forward as well I think these are the few things we continue to let the market know and I think
06:56in a very good way of confidence in the next few quarters we will see the numbers will be up
07:01and I
07:02think just want to share one thing is we're confident that our cloud revenue will be at a good level
07:06of
07:06increasing and at least faster than the industry average in the next few quarters and our capex spending
07:12will be lower than the market's expectation so smarter way less spending high growth in the market and a
07:18better way of let the market and the users to use our AI I think these are the things actually
07:22market
07:22has not noticed that David back to you
07:27yeah and and Henry I mean to be fair you're correct it's not just you guys I think we just
07:32showed a
07:32chart there it's you and some of your other tech peers in the industry that are sort of grappling with
07:37and we all know this right markets are all about narrative what's the story you tell what's the
07:41story that investors are buying so I guess my question there given everything you said is that do you think
07:46the
07:46markets and investors should stop looking at Baidu as an internet advertising business
07:54the short answer is we want to define ourselves as a AI technology driven a four stack technology company
08:04with the search and as as part of applications
08:11uh how do you calculate that ROI on on AI infrastructure right now when when you have so
08:17much changing with the technology with the inference that's evolving so quickly what metrics do you look
08:22so I think I put this way I think I really appreciate and thanks for the technology itself right so
08:27if you
08:28think about the resource and infrastructure in all the way of doing cloud everything is resource driven right so
08:33you remember we have this ice pass and sass dividing of all the stacks and charging clients with different
08:39revenue models but today a good way of looking at this the mass revenue is essentially linking the results
08:45of the customer how they see the value itself and the tokens we actually hosting all different models
08:52including our own model of earning in our cloud environment the tokens can be more efficient because you can
08:57deploy different routing different models and the cost benefits and the diversification of the
09:04infrastructure as a platform it's actually become more valuable I think this is actually a new way
09:09technology can evolve our business as well you mentioned about how you you will be spending less
09:14this is coming a time when some of your competitors are raising billions of dollars whether it's through
09:19share placements the bond market and the like can you afford to to not take part in that in some
09:26ways I mean
09:27how should I be looking at the trajectory of your capex next year so the punchline is we want to
09:32spend
09:33smarter yeah but probably less but deliver higher growth I just want to share some numbers first of all
09:38we do have about a 40 billion US dollar cash and the liquid investment on our balance sheet which could
09:43good enough support for our cash flow number two in the past four quarters our operating cash flow actually
09:49has been increasing consistently even though we're investing more on AI so you see there's a good balance to
09:54resolve this impossible triangle gross cash and a delivery on capex so the next one is also
10:01just want to also share with the message of the market for now we don't see any
10:06need for Baidu to raise either bond or capital okay or equity money on the market we want to recycle
10:14the
10:14money we have as I mentioned in order of doing business in the market on average maybe four five
10:19six years to have the full payback but right now the new AI as I mentioned the mass tokens become
10:24every thing become more efficient we're seeing probably two three years will be sufficient so
10:29that's why we have 40 billion dollar cash and we do see shortened period of payback and there's a way
10:34not
10:35tapping the capital markets both on equity and the debt but also you know the onshore market right now
10:39is very cheaper as 2.5 2.3 percent and in us it's already four five six percent so I
10:45think we do have
10:45a good economic formula to tap in the onshore market that's why the prime listing Hong Kong is helping us
10:50because the onshore equity market onshore debt market the bank loan market can help my AI to
10:56be grow faster but with a much lower cost if you look at the entire four five six years two
11:01percent is
11:02only mean ten percent of the interest cost but in the US market five percent times five years 25
11:06percent so we have additional 20 percent of the buffer we can we can play with yeah you're also
11:11spinning off the chip unit Kunlun Ching which is the next sort of one that we're anticipating this
11:15listing as well which could potentially unlock a lot of value for shareholders what what are still some
11:20of the key remaining sort of milestones that you still need yeah so right now uh because it's confidential
11:26filings so we can probably cannot make more additional announcement before we're hitting the reasonable
11:33milestone but i would say the business of Kunlun right now is proceeding pretty well because the
11:38major changes two three years ago is the majority of the chip will be using for pre-training a foundation
11:44model but right now most of the increasing demand is from inference yeah so that application is really
11:50fitting to Kunlun chip because it's good product for inference and post-training for applications does the
11:56chip restrictions in the US change how you deploy and plan your capital at all uh i think obviously
12:02we follow all the necessary legal requirements but also right now we are seeing increasing demand in
12:08the onshore mainland china market and many of the applications become more popular and the token
12:13assumptions can be running on the local chips
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