Baidu Surges With Bullish Options as Robotaxi Orders Climb

(Bloomberg) — Baidu’s shares jumped by the most in more than a year and bullish options bets surged to a record on signs of growing popularity for its Apollo Go robotaxi in China.

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The stock 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.

China’s internet search leader is investing in generative AI and autonomous driving to diversify its business as the nation’s economic growth slows and impacts advertisements. Traders are betting that robotaxis will get another push after the capital Beijing announced this week that it’ll support them for ride hailing and car rental fleets.

“Autonomous driving will turn into a key trade in the coming three months, aided by Tesla’s launch of its robotaxi next month,” Guotai Junan International analyst Li Muhua 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. was recently granted 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 pilot road 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 auto 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 Apollo Go should turn profitable by 2025.

Baidu needs the lift, with its stock still down more than 17% this year, compared with a 2.5% gain in the benchmark Hang Seng Index. After reporting slowing revenue in the latest quarter, Baidu shares fell to their lowest price since November 2022 earlier this month.

As the stock sank, the cost of hedging against further declines also dropped. The measure known as skew is now near a three-year low, following a similar trend for options on the American Depositary Receipts. In the US, bullish options volume surged on Tuesday to its highest level since March 2021, with two opening block trades of calls betting on a 25% jump from the previous close changing hands at the ask, data compiled by Bloomberg show.

“Baidu is one of the leading autonomous driving system providers,” said Phil S. Lee, head of Asia-Pacific research at Mirae Asset Global Investments in Hong Kong. “Its key advantage is that it’s open to many brands. It can work in China, where the government promotes autonomous driving.”

–With assistance from Sangmi Cha and Cecile Vannucci.

(Updates with options data from headline and analyst commentary)