Well what do you know, Cathie Wood just increased her stake in a Chinese tech stock that, oddly enough, is also one of Michael Burry’s biggest positions. You remember the movie right? The barefoot, heavy-metal-loving investor who famously called the 2008 housing collapse and now seems to thrive on betting against everything Wall Street is excited about. But this time, both he and Cathie are on the same side. The stock I’m talking about of course is Baidu… China’s version of Google.

Now, let’s break down what’s actually happening here. Earlier this week, Cathie Wood’s ARK Invest added to its Baidu position in two of her funds. The ARK Innovation ETF purchased 2,798 shares, and the ARK Next Generation Internet ETF backed up the truck with another 82,455 shares. That brings her total stake to 85,253 shares. For reference, that’s not massive in dollar terms (about $7.7 million based on the stock’s current price) but it’s still a meaningful allocation, especially given ARK’s emphasis on disruptive tech.

So why is Baidu, a stock hovering just under $90 and barely limping into positive territory for 2025, getting attention from two of the most contrarian minds in investing?

Start with the valuation. Baidu is cheap. Like actually cheap… not “cheap compared to Palantir” cheap. The stock trades at a forward P/E of 8.88, compared to the industry average of 19.06. It also has a price-to-cash-flow ratio of 4.63, versus a sector average of 16.11 (which feels like the steal of all steals).

For a company with a dominant search engine in the world’s second-largest economy, that kind of valuation doesn’t come around often. The catch, of course, is why it’s cheap. Of course, there’s a reason this thing is sitting on the clearance shelf. Baidu’s growth lately has been about as exciting as watching someone fold a fitted sheet… technically progress, but not exactly inspiring. Revenue has declined for three straight quarters. Blame it on a weak Chinese economy (which feels like the default excuse for everything now) and a tech arms race where everyone from ByteDance to Alibaba is sprinting like it’s the last AI chip on Earth. That said, Baidu’s not going down without a fight.

Last week, CEO Robin Li took the stage at a developer conference in Wuhan and unveiled Ernie 4.5 Turbo and Ernie X1 Turbo… two new AI models that sound like they were named by a 12-year-old designing a robot for a video game. But don’t let the names fool you. These models are legit: better memory, tighter cloud integration, fewer hallucinations (which, in AI speak, means less chance of your chatbot claiming Napoleon invaded Mars), and tools for building out fully functioning AI agents to automate everything from e-commerce to logistics.

In other words, Baidu’s trying to get ahead of its domestic rivals. That includes Alibaba’s Quark, ByteDance’s Doubao, and DeepSeek, all of which have been dominating Baidu when it comes to monthly active users.

To get around U.S. sanctions that cut off access to Nvidia’s top-tier chips, Baidu went full DIY and built a massive computing cluster using 30,000 Kunlun P800 chips… custom hardware developed in-house. I know that’s confusing but that’s not a move you make unless you’re in it for the long haul.

Now, let’s cut the crap… Baidu making its AI models open source after bailing on the subscription model was almost definitely not part of some brilliant master plan. That’s not innovation, that’s code “no one was paying for this, so we’re pretending we meant to give it away all along.” But rather than doubling down on a model that wasn’t working, Baidu adapted. That shows humility and strategic thinking… two qualities that don’t show up in earnings reports but matter a lot more than people think.

Now to the reason you’re actually reading this article (unless you’re an AI nerd)... is Baidu a buy? A short answer for me is Yes. At this valuation, with this kind of tech infrastructure, and with two of the most polar-opposite investors both seeing long-term potential… it’s a textbook asymmetric opportunity. As I’ve explained, it probably won’t explode overnight, but Baidu offers rare upside if you can look past the headlines.

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Stock.News has positions in Google.