(Bloomberg) — Baidu shares jumped the most in more than a year and bullish options bets hit a record high on signs of growing popularity for its Apollo Go robotaxi in China.
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Shares rose as much as 13% in Hong Kong, following an 8.5% advance in the US on Tuesday. More than 48,000 calls changed hands, six times more than the 20-day average and double the number of bearish puts.
The Chinese leader in internet search is investing in generative AI and autonomous driving to diversify its business as the country’s economic growth slows and impacts advertising. Traders are betting that robotaxis will get another boost after the capital Beijing announced this week that it will support them in ride-hailing and car rental fleets.
“Autonomous driving will become a hot trade in the next three months, aided by Tesla’s launch of its robotaxi next month,” Li Muhua, an analyst at Guotai Junan International, wrote in a note. “Baidu’s Apollo Go is expected to break even in Wuhan in 2024 and be profitable in 2025 with an increase in its fleet in the city.”
Tesla Inc. recently received approval to test its advanced driver assistance system on some Shanghai streets, according to a person familiar with the matter, Bloomberg reported last month. China’s Ministry of Industry and Information Technology said in late November it would allow on-road pilot tests for selected self-driving cars in designated areas.
More tests
Apollo Go has started manned tests in 11 Chinese cities and is conducting unmanned automatic driving tests in Beijing, Wuhan, Chongqing, Shenzhen and Shanghai, Li wrote in the note, adding that operating costs will drop significantly. Baidu said in May that Apollo Go was expected to become profitable by 2025.
Baidu needs a boost, with its shares still down more than 17% this year, compared with a 2.5% gain in the benchmark Hang Seng index. After reporting slowing revenue last quarter, Baidu shares fell to their lowest price since November 2022 earlier this month.
As stocks sank, the cost of hedging against further declines also fell. The measure known as slope is now near a three-year low, following a similar trend for options on American Depositary Receipts. In the US, bull option volume rose on Tuesday to its highest level since March 2021, with two opening block trades betting on a 25% jump from the previous close changing hands in selling, show data compiled by Bloomberg.
“Baidu is one of the leading providers of autonomous driving systems,” said Phil S. Lee, head of Asia-Pacific research at Mirae Asset Global Investments in Hong Kong. “Its main advantage is that it is open to many brands. It could work in China, where the government promotes autonomous driving.”
–With assistance from Sangmi Cha and Cecile Vannucci.
(Updates with security options data and analyst comments)
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