One Way Or Another


Baidu, China’s largest internet search engine, climbed more than 1.5% intraday after COO Lu Qi said the company’s business focus has been shifting toward artificial intelligence (AI) applications from Internet services. Speaking at the company’s first AI developer conference Baidu Create, which was recently held in Beijing, the COO said Baidu has the world’s largest artificial neural network, a large AI center with more than 2,000 research & development staff members and a tremendous volume of data.

Lu went on to say that “Baidu, with its experience, expertise and a large volume of data from operating online search services, has the competence and opportunities to promote the development of AI technology and applications.” We hold a substantial position in Baidu in both the Fat Prophets Global Contrarian Fund and the US, Global and Asian Managed Account portfolios.

Baidu has significantly underperformed all the major internet stocks but I see sentiment turning on the back of a return to top line revenue growth in the search business, and as commercialisation of the AI technology becomes more apparent to the market.

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Reliance Industries, the Indian conglomerate, continues to rollout and deliver with a national mobile network JIO. The mobile phone division plans the first price increase in a year that will brings JIUOs ARPU closer to that of the sector. Analysts at UBS say the “first JIO price increase in almost 12 months supports their view that sector revenues are close to bottoming out, with the top three operators and JIO expected to incrementally take share from smaller entities”. Credit Suisse also said in a note the new JIO rates would start the process of normalising from the current discounted levels. This is positive news for Reliance, which after significant capex is closer to monetising its investment in the telecom subsidiary.

Harsh Jagnani, vice-president of corporate ratings at ICRA, says the new plans point to improvement in average revenue per user (ARPU) and that JIO, after grossing 100 million subscribers, is focussing on pushing this up to improve its profitability. Reliance has broken out on the upside after establishing a long-term base. We hold a significant position in Reliance in the Fat Prophets Global Contrarian Fund and the Asian, Global and UK Managed Account portfolios.

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Disclosure: The Fat Prophets Contrarian Fund declares a holding in Baidu and Reliance.

Carpe Diem!

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