ByteDance denies Kunlunxin AI chip deal, casting doubt on $50B IPO plan

ByteDance has no intention of using Kunlunxin's AI chips, contradicting market rumors that sent Baidu's stock up 7%.

ByteDance publicly denied any plan to cooperate with Baidu's AI chip subsidiary Kunlunxin, removing a key growth catalyst that had fueled a 7% surge in Baidu's shares and underpinned Kunlunxin's reported $50 billion Hong Kong IPO valuation target.

"ByteDance currently has no intention to cooperate with Kunlunxin," a person familiar with the matter told China Business Network, contradicting earlier reports that the TikTok parent was considering adopting Kunlunxin's AI accelerators.

The denial comes one day after The Information reported that Kunlunxin, 58%-owned by Baidu, was targeting a $50 billion valuation in its Hong Kong listing — a 17-fold increase from the roughly $3 billion valuation in its December funding round. Baidu's shares, which had jumped as much as 7% on the IPO and partnership speculation, pared gains after the denial. The stock is down 20% year-to-date across both Hong Kong and New York listings.

The ByteDance relationship was seen as a potential validation of Kunlunxin's technology and a major revenue driver. Citi analysts had forecast Kunlunxin revenue reaching 14 billion yuan ($2 billion) in 2027, more than triple last year's top line. Without ByteDance as an anchor customer, those projections face increased uncertainty, and the $50 billion valuation — already implying roughly 25 times forward sales, in line with Shanghai-listed Cambricon Technologies — looks harder to justify.

Kunlunxin's competitive position

Kunlunxin, named after a sacred mountain range in Chinese folklore, was founded in 2011 as Baidu's in-house silicon unit and is considered one of China's most promising challengers to Nvidia. Domestic chipmakers now hold 41% of China's AI accelerator server market, according to IDC, as Washington's export controls and Beijing's preference for homegrown alternatives reshape the competitive landscape. Kunlunxin remains a minnow compared with Nvidia and larger domestic rivals such as Huawei and Alibaba's chipmaking arm, but its independence from the e-commerce and social media battles that entangle competitors has made it a neutral supplier.

Customer pipeline under scrutiny

The denial raises questions about Kunlunxin's customer pipeline. Reuters reported on June 15 that ByteDance was in talks with Shanghai Iluvatar CoreX Semiconductor for AI chip purchases, suggesting the social media giant was exploring multiple domestic suppliers. Tencent is already a Kunlunxin customer, according to Reuters Breakingviews, but the loss of ByteDance — one of China's largest AI infrastructure spenders — removes a marquee name from Kunlunxin's potential client roster. The Information had also reported that Kunlunxin was "prioritizing" potential investors that buy its semiconductors in the share offering, a strategy that now appears more constrained.

Investment implications

For Baidu, the Kunlunxin narrative had been a rare bright spot. The $34 billion search-engine operator has seen its stock languish even as AI euphoria lifted peers, with its robotaxi business and AI applications failing to offset concerns about core search revenue growth. The Kunlunxin stake, at the $50 billion valuation, would have been worth more than 80% of Baidu's entire market capitalization — a disconnect that the ByteDance denial now exposes as speculative. Baidu trades at roughly 12 times forward earnings, a discount to Alibaba at 15 times, reflecting the market's skepticism about its AI monetization timeline. The Bank for International Settlements flagged over the weekend that the global AI capex boom could turn into a "protracted investment bust," a warning that applies with particular force to Chinese chipmakers riding valuation multiples unsupported by confirmed customer demand.

This article is for informational purposes only and does not constitute investment advice.