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(Bloomberg) -- The current earnings season has largely been a letdown for China’s big tech stocks, lowering the hurdle for Baidu Inc. to impress investors seeking a fresh angle on the artificial intelligence theme.

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China’s top search engine had made early advances in AI but fell behind as DeepSeek shocked the world with its low-cost model and Alibaba Group Holding Ltd. grabbed headlines as well. Baidu’s shares are up 6% in Hong Kong this year, while Alibaba has surged 48% and the Hang Seng Tech Index has climbed 19%.

The street has drastically lowered its view on Baidu ahead of its results due later Wednesday, with the average 12-month analyst price target for the stock down 26% over the past year. It’s also now trading at a big discount relative to peers and historical levels.

In a similar vein to Alphabet Inc.’s results beat last month, “if Baidu can build a strong case that search is not an ex-growth business and GenAI can boost its existing business including search, that will make the low expectation into the earnings play in favor of the stock price,” said Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management.

China tech stocks have lost some steam since March’s DeepSeek-fueled peak amid concerns over tensions with the US, the health of China’s economy and Beijing’s stimulus plans. Recent earnings from Alibaba and Tencent Holdings Ltd. underwhelmed investors looking for a new catalyst.

Advertising still accounts for the bulk of Baidu’s revenue, and investors will be closely watching for clear signs of improvement in the macro-dependent business. UBS AG estimates its ad revenue declined 5.7%, a smaller drop than in the December quarter.

The slow ad recovery has been weighing on Baidu’s shares the most, said Kai Wang, a Morningstar Inc. analyst. “Once advertising comes back, Baidu’s valuation should come up pretty quickly, as that’s likely holding the AI business back,” he said. “It’s one of the few players in China that can actually build out the data centers and AI infrastructure, while its AI offerings with the Ernie model have improved.”

The stock’s underperformance has made it cheaper, currently trading at 8.6 times forward earnings estimates, well below its longer-term averages as well as the Hang Seng Tech Index’s 16 times.

On the positive side, UBS, Morgan Stanley and others expect Baidu to post robust cloud sales growth of more than 20% for the three months ended March, extending the December period’s AI-driven momentum. Analysts project it will report a narrower decline in overall quarterly revenue and return to positive growth for the full year.