Baidu Inc. (BIDU), the Chinese tech giant, experienced a pre-market plunge of over 5% on Tuesday, as the company grappled with multiple challenges weighing on its stock performance.

One of the primary factors driving the decline was a slowdown in advertising revenue, which accounts for a significant portion of Baidu's core business. As China's economic growth slows and the property market remains sluggish, small businesses have been forced to trim their advertising spending, impacting Baidu's top line.

Furthermore, the company faces intense competition in the rapidly evolving artificial intelligence (AI) landscape. While Baidu was an early mover in launching its ChatGPT-style Ernie chatbot, it has struggled to gain widespread adoption due to fierce rivalry from competitors like DeepSeek and Alibaba. Investors are closely watching Baidu's ability to monetize its AI initiatives and offset the decline in its advertising business.

Adding to the concerns, Baidu's founder and CEO, Robin Li, was conspicuously absent from a high-profile meeting between Chinese President Xi Jinping and tech industry leaders on Monday. This absence raised speculation about whether the company is falling out of favor with the Chinese government, which is relying on the private sector to drive innovation and economic growth, particularly in the AI domain.